By extending your business to an online context you are invariably involving a degree of ‘change’. Change normally comes about because something is not working as it should or is not generating a desired effect, therefore modification or radical improvements are called for. So what does an expansion initiative need to consider before it is deemed necessary and implemented? Any form of change requires a level of testing and retesting so that the implications can be clearly understood and appreciated.
The effect and need for change within the context of online expansion depends on your organisation’s current strategic position and size. For example, a small organisation may deem an online ecommerce site on its own enough of a change to outperform its competitors; it’s simple yet necessary to achieve that advantage. However, online campaigns can vary greatly; a medium to large corporation may require something much more convoluted for instance. Consider the implementation of a whole new image and function: perhaps an integrated intranet and extranet, a customer relationship management system with a logistical management facility; its purpose, to save on costs and to provide the customers with better service value. This size of project requires considerably more thought and planning in order to achieve what is expected – competitive advantage. The only difference in these two examples is the degree of strategic assessment needed beforehand to exploit the online benefits available for their market. You would agree that to implement such a project there would be a higher requirement for testing and risk assessment compared to the smaller ecommerce project. Let’s take a look at how you might approach this issue using the latter example (the smaller project may not need to go into such detail).
It is assumed for this example that a medium sized organisation might already have an internal management system of some kind; the project would require the system to be compatible with the online web application that will be introduced, it also needs a resource to implement and maintain this online system. How will the organisation assess the risk to reward ratio i.e. how will the organisation decide if the implementation costs are outweighed by the reward (increased repeat sales, lower cost etc)?
I want to suggest a thought process which will take you through such an assessment. It is loosely based on work by Johnson and Scholes. They suggest a change project should be asked three important questions: Would it work? Can it be made to work? Will they work it?
Firstly, for it to work, the proposed campaign would need to be consistent with and fulfil the market’s key success factors that the organisation operates within: these are arguably the minimum entry requirements of that particular market. Does the project address a problem or opportunity which has been identified in the market i.e. ability to reach more customers, lower the cost of service for the customer, exploit lack of opportunistic competitors (competitors not using online platform to sell products for example) or maybe allowing for lower internal operational costs – to name a few? Does it fulfil a resource of capability weakness in the organisation or environment i.e. does it fulfil the competitive gap between itself and other competitors in the industry? Perhaps cost is the only definitive difference, or quality of service. Does the project capitalise on the organisation’s identified resources and capabilities in a way that relates to external opportunities? If you have competent staff that can develop the online software in-house, you won’t need to outsource. Does the project fit the organisation’s objectives, such as required rates of return on capital, profitability measures and other, non-financial, performance indicators? Increasingly, these objectives may also involve considerations of the organisation’s role in a wider context.
Secondly, what is the likelihood that the organisation can actually deliver the required level of quality service that the campaign hopes to achieve? Would an online campaign aimed at reducing costs in logistics (using web based applications) for example, run into problems associated with inadequate managerial resources; perhaps the occurrence of insufficient numbers of trained staff or inadequate process and product technologies at times in the business? To implement this project you would require adequate resources; this includes human resource in the form of tried and tested knowledge (knowledge of the processes and of the subject in hand). If your knowledge base is externally sourced (consultants) then you will need to consider the resource requirement for new staff that can adapt, update and maintain the online software. All these resources require capital; a company must consider whether it is cash rich or credit worthy for banks to help with the project. Are these options possible?
How do you envisage your competition will react to your expansion project and how will the organisation cope with that reaction? For example, an online campaign to increase the reach potential of customers or reducing prices may result in copycat behaviour from competitors in the same market and may lead to a fierce competitive reaction.
What about the internal effects? How do your stakeholders feel about the project? Will they accept that the rewards are higher than the risks? Employees can have a great deal if united! For the smaller organisations, stakeholders might only include the immediate staff, a few suppliers, customers, occasionally the local community and the owners. In this size of business it is unlikely that expanding your business online to reach more customers will upset too many of these stakeholders. It becomes more of a problem for example when the project requires a resource type and level that is not readily available internally i.e. the need to replace current staff with more specialist staff; this quite rightly gives an unacceptable level of risk to the employees. Will the implementation require such a change in the internal systems and procedures that there will be an unacceptable level of pressure upon staff? New processes, like anything new, require a learning curve to be experienced, only then will you benefit from a lean system of routines and tasks for staff to work with. Will your staff have time to learn and correctly use the new system? This whole development will require a constant loop of evaluation and improvement processes in the early stages. This means a requirement for resources via staff hours and time must be calculated on top of other costs mentioned earlier. The cost against the benefit of the systems implementation is therefore an important factor to consider before the new system project is accepted.
Whatever the size of the online campaign, it is likely and in fact recommended that its objective and effects on the organisation and its stakeholders as a whole is evaluated thoroughly so that the true advantages over disadvantages can be appreciated beforehand.
Ultimately all organisations are aiming to create competitive advantage, so does an online campaign warrant risking the above mentioned points? If it is understood to lead to a sustainable advantage then in my view, yes it does. As long as the risk assessment is thorough enough and the implementation fully accepted and facilitated by all those affected it should carry a good chance of success. Competitive advantage is understandably hard to maintain therefore risks are sometimes essential for businesses to survive.
