e-Strategy or e-Business Strategy is the business use of the Internet. The “use” results in a “business benefit” such as higher revenues, reduced costs, or reaching an underserved market. “Internet” includes all technologies and applications enabled by the Internet. e-Strategy is an iterative process to create and/or modify an organization's business model for eBusiness:
- It is a process, not a point-in-time event
- It is iterative - success comes after multiple - do and learn – cycles
- The key is the creation/modification of the business model, not designing websites to address business requirements
- The former focuses on the business
- The latter focuses on integrating emerging technology; that is the purview of IT Strategy (Information Technology Strategy)
- e-Strategy sets the direction for the entire organization
- It is one and the same as the "business" strategy. If one must, then eStrategy is a subset of business strategy
- It is not an "IT Strategy" for the Internet. Much like business strategy drives strategic planning for information technology, eStrategy drives the IT Strategic Plan
- e-Business affects the entire organization, so the focus of eStrategy is on the entire business, not on creating a new distribution channel or creating a customer portal or targeting a new internet-based market segment
- e-Strategy focuses on creating maximum value, not on creating revenues or reducing costs through the internet
e-Strategy helps create shareholder value. In other words, it helps identify the "new" business model to compete in the "new" world that now includes the internet-based ecosystem
Planning the e-Business Strategy
e-Business strategy is not just for Internet Businesses. An e-business strategy is essential to any organization conducting business over the Internet. It defines both short-term and long-term e-business goals and involves careful and skilled planning. E-Business strategy is part of the corporate strategy and business plan and also interconnects with other plans, including marketing, organizational, and IT strategic plans.
e-Business Strategy and planning includes the following:
- E-Risk management and contingency planning
- Website Technology, applications, infrastructure, security, resources, and budget
- Website Content - Information architecture, customer experience, design, branding, and marketing
- Marketing planning and budgeting
- E-Commerce planning (if relevant)
- Change Management Strategy
Types of e-Business Strategies
Several strategies have proven successful to drive revenue and promote a company both online and off. Choosing the best e-business strategy for either an established company or a startup involves making decisions about where money should come from and how the website can bring in the most traffic.
- Marketplace Hosting: Many e-businesses succeed by hosting a site for auctions and online stores on which members can place items for sale. In this model, the website owner takes a flat fee or a percentage of sales in exchange for promoting the online marketplace and assisting in processing the transaction. Some businesses combine this option with their own warehouse, offering both their own goods and advertising members' listings for the same items. Additional revenue for the website owner can come from members paying additional fees to spotlight their offerings on the main website.
- Turnkey Businesses: A turnkey business functions with a pre-existing template for its given industry. These websites may offer anything from diet pills to a dating network for a particular city. The turnkey model requires less work than others but also faces stiff competition. The operator must do some legwork to produce the site's content and sell ad space to generate more income. Marketing mostly relies on optimizing the website to appear on as many search engine result pages as possible.
- Ad-Supported Content: Some websites develop into effective e-businesses without directly selling anything at all. With enough worthwhile content and frequent updates, blogs and similar informative sites can succeed simply by selling ad space. The profitability depends on the motivation and talent of the people producing the content. A combination of entertaining the reader and drawing in references to appropriate consumer products can potentially generate enough advertisements and revenue sharing to support the site as a business.
- Freemium: The freemium model for e-business involves offering some content for free while charging membership dues or other fees for special access or materials. Often in combination with another business model, a freemium site caters to both casual visitors and devoted fans. The site can offer all content for free at its beginning to generate interest and later begin charging for membership, or it can permanently divide its content between free and paying members.
- Warehouse Sales: For an existing company, a new company starting with a surplus of products, or a company liquidating merchandise from the retail industry, an e-business can function as a sales point for a warehouse of inventory. For companies with physical stores, the website can offer overstocked items, popular items selling at high volume, or obscure items unlikely to sell at single locations. An online store can also serve to liquidate leftover merchandise bought at closeout from various suppliers.
- Social Media: While allowing users to register accounts and contribute their own information and content, a social media site can create revenue from ads on the site and sell the members' information as marketing data. The website can have either a broad scope or a very specific one with a geographical, cultural, or interest-based theme. The site entertains and informs its users, who can receive targeted ads based on what information they've entered on the site.
e-Strategy - The Strategic Planning Process
There are two broad circumstances in which an enterprise will strategize its e-business initiatives:
- on a periodic, formal, scheduled basis and,
- when a crisis or significant event occurs. The timeframe of periodically scheduled strategy development depends on your own organization's policies.
Managers must be aware that developing a strategy in isolation—failing to include stakeholders—significantly increases the risk of failure. Risks are increased for two main reasons.
- Firstly, failing to engage stakeholders minimizes or even eliminates the ability to gain a wider understanding of the problems at hand. Stakeholders of all kinds can provide insights that help build a more complete picture of the competitive e-business landscape.
- Secondly, failing to engage stakeholders adequately can create a future problem for strategy implementation. Stakeholders who are either required to implement the strategy or are directly affected by it but have not been consulted in its development are unlikely to feel any ownership of the project.
- E-business must be integrated and not isolated. You can't separate your e-business strategy or any implementation from the totality of operations. If you try to 'rope it off (by, for instance, treating it as a specialty for your information technology experts to mandate), you will get it wrong.
- E-venturers demand the development of a business model as a predicate to a business plan. You simply can't make a meaningful plan if you have not first developed a thoroughly well-wrought sense of corporate persona.
- An e-venturer's business model will require constant updating, adaptation, and change. This is why the process of model generation is more important than its current output. Organizations must continually re-design themselves. Yesterday's business model may not serve you well tomorrow.
- So, the key to success in e-business is the robustness of the process used to keep producing a stream of appropriate business models—plural!
- Sales: number of customers, visits, purchases (including conversion ratios)
- Financials: costs, revenues, profits (including financial ratios)
- Inventory: production cycle times, inventory turnover, percent stockouts, etc.
- Distribution: delivery and channel assessment
- Customers: satisfaction.
- Strategy metrics must be built into the strategic plan so that everyone is aware of what the critical success factors are and how they will be measured. A key element of metrics is to activate them early and use them often.
e-Strategy Framework (See Figure 1.)
The key elements of an e-business strategy framework are explained along three phases of strategic analysis, strategy formulation, and strategy implementation as follows:
- External analysis - macro-environment and industry structure
- Internal analysis - key resources and capabilities
- Generic strategy options
- Sustainable competitive advantage
- Exploration of new market spaces
- Creation and capturing of value
- Internal organization
- Interaction with suppliers, customers, and users
- Mobile e-commerce strategies
- Strategy implementation
Framework for e-Strategy Formulation (See Figure 2.)
- Appreciate the strategic context
- Understanding long-term goals and vision for the organization
- Its ‘strategic intent’ (Broadbent & Weill 1997)
- Understand the external environment
- Identify potential synergies and economies of scale through similarities between business units
- Appreciate the impacts of the Internet on organizations and industry
- Understand external and internal IT environments
- Recognising key IT trends in the industry
- Appreciate how competitors and business partners are using IT
- Understand internal strengths and weaknesses
- Recognise capabilities
- Perform audit of IT infrastructure, IT skills, and IT management
- High-level strategic visioning and thinking
- Articulate business and IT maxims
- Business maxims: high-level statements about the competitive position, how value is created for customers, intentions regarding growth and development, its position of use of resources, etc.
- IT maxims: statements about how information and IT will be valued and deployed in the organization
- Defining key parameters for IT
- Role of IS/IT: strategic enabler (opportunistic) or support?
- Sourcing of IS/IT: Insourced, selectively sourced, or outsourced?
- Structure of IS/IT dept: Decentralised, federal, or centralized?
- View of IT infrastructure: Enabling or utility view?
- Decisions about parameters should be aligned with business strategy
- Complementary views of strategy
- View presented so far regards strategy as developed from an understanding of the nature of competition, industry and organizational structure, and competitive response
- But the strategy can be articulated based on an understanding of internal resources, capabilities and competencies, and access to external resources, etc., which can be harnessed as sources of competitive advantage
- Each perspective offers valuable insights into strategies that an organization can adopt
- Tools to support strategy formulation
- SWOT analysis
- Product and service lifecycles
- PEST analysis
- Competitive forces analysis
- Value chain analysis
- Critical success factor analysis
- Business technology audit
- Gap analysis
e-Strategy vs. Other Strategies (Figure 3.)
A state-of-the-art E-Business Strategy would generally include:
- Supply chain management: effective management of the supply chain can be handled with the help of e-business strategies, which will ensure better coordination between the wholesalers and the retailers of various products. Better integration of the supply chain right from the source to the final delivery of the product can be effectively implemented using an e-business strategy. This also brings us to the point of e-commerce, where a parallel network of buying and selling can be observed by disseminating information over the Internet. Everything ranging from automobiles to electronic gizmos can be bought over the Internet in a hassle-free manner under the aegis of sound supply chain management.
- Customer service and customer relationship management: effective e-business strategies would involve better customer service and customer relationship management, ensuring the highest level of consumer satisfaction. E-business is targeted at providing customer-friendly services, which would include the timely delivery of goods right to the doorstep of the consumer.
- Inventory and service management integration: e-business strategies can also help in better inventory and service management integration through formulating specific plans for inventory accumulation and purchasing machinery and equipment, which will avoid unnecessary purchases which can lead to higher expenditures entailing different tax implications.
- Tactical operations alignment: tactical operations directed toward short-term goals as opposed to strategic planning aimed at long-term goals can be better coordinated by implementing e-business strategies.
e-Strategic Plan Template
Sample e-Strategic Business Plan
e-Business Plan Example
An e-Business Plan Sample Presentation
e-Business Model (Figure 4.)
The e-Business model, like any business model, describes how a company functions, how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies. It has four traditional components, as shown in the figure, The e-Business Model. These are the e-business concept, value proposition, sources of revenue, and the required activities, resources, and capabilities. In a successful business, all of its business model components work together in a cooperative and supportive fashion.
Absence of an e-Strategy
- Missed Opportunities for additional Sales on the sell side and more efficient purchasing on the buy-side
- Fall behind competitors in delivering online services - may become difficult to catch up, e.g., Tesco, Dell
- Poor customer experience from poorly integrated channels
- What is e-Strategy
- eBusiness Strategy and Planning
- What are the different types of e-Business Strategies?
- The Strategic Planning Process for e-Business Initiatives
- e-Business Strategy Framework
- Framework for e-Strategy Formulation
- What does an E-Business Strategy would generally include?
- The e-Business Model
- What Happens when there is no e-Business Strategy?