An e-business by any other name

Pity the poor letter e, a useful and hard-working vowel. E had been putting in a lot of overtime with e-this and e-that. I blame that ubiquitous e-word: e-business.

Pity the poor letter e, a useful and hard-working vowel. E had been putting in a lot of overtime with e-this and e-that. I blame that ubiquitous e-word: e-business.

How do you know you're an e-business? I could give you a pop quiz, but if in the time it would take to complete that quiz your company merged with its closest competitor, took the guerrilla position in your market, and was split up by the government's antitrust lawyers you probably have your answer.

But what exactly is an e-business?

Fill a room with high-priced Internet consultants and you'll get as many answers as overpriced timepieces. But I digress.

E-business is about harnessing network effects.

If you have a Web site, are you an e-business? Although a good idea, a Web site doesn't make you an e-business any more than having a laptop makes you a mobile business. Most companies with Web sites are offering, in essence, an online catalogue. A remote customer calls your company, orders a product, and has it delivered? Sears & Roebuck did it a hundred years ago. E-business is more than paperless catalogues.

What about moving data across digital networks? The whole alphabet soup of ERP (enterprise resource planning), SAP, CRM (customer relationship management), and IOU? Almost, but not quite. Consider EDI's (electronic data interchange's) history in business-to-business commerce.

The ever-observant Bob Metcalfe once observed a principle now dubbed "Metcalfe's Law." (I'm not buttering up Bob -- he was already gracious enough to give me an autographed copy of his book.) Metcalfe's Law says that the utility of a network is a function of the number of users -- the more users, the more utility.

That is the starting point of e-business: harnessing powerful effects of networks with a mass of users. But Metcalfe's Law reflects potential energy, if you will. For true e-businesses, there's an additional step beyond Metcalfe's Law. Turning that potential energy into kinetic energy is what e-business is about. Efficiently organising the power of a network around a transaction is e-business.

EDI was a static hub-and-spoke organisation of business. E-business provides the ability to dynamically organise members of a network. Dynamic and efficient organisation of a network is the key to e-business.

When a customer conducts a transaction, a whole host of entities suddenly and seamlessly organises around that transaction. IT inventory, logistics, payment processing, and delivery: All these and more coalesce around this single purchase. The functions necessary for any given transaction organise on a mix-and-match basis, then disband when that purchase is complete.

The power of e-business is the ability to reach and organise customers. Essentially, an e-business makes everyone who conducts a transaction with a company a part of the business on an ad hoc basis. Making the customer an extension of the business -- or the business an extension of the customer base -- that's e-business.

In the perfect e-business world, organising one member is the same effort as organising an infinite number of members. And the closer that effort is to zero, the better.

There is never perfect efficiency. Servers must be added, networks upgraded. But the closer the effort to organise network members around a transaction approaches zero, the closer you are to being the perfect e-business.

Send email to Sean Dugan.

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