“Winning in the race for e-business”

“Winning in the race for e-business”

Lecture Four - “Benchmarking global best practice”

Presentation to Sheffield University Management School MBA Students

24 February 2005

Prof. Jim Norton

Senior Policy Adviser

UK Institute of Directors

Former Director UK

Cabinet Office PIU

e-Commerce team

www.profjimnorton.com

•How much business is e-business?

•Measuring national e-business capabiltity.

•2004 international benchmarking study results.

•A challenge: Remember the “people” dimension….

•Final thoughts.

Issues to be covered

How much business will be e-business?

Source: Net Figures at Net Profit - March 2002 and ONS Nov 2004 http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=6645

UK e-business sales revenues:• 2002 revenues were £19bn; and

• 2003 revenues were £39.5 (up 108%);

• of this £39.5bn, £11.45bn was B2C (29%)

• goods at £27.26bn outpace services at £12.24bn.

UK businesses & consumers bought £195.6bn of goods and services over other ICTs (EDI, e-mail, automated telephone sales in 2003.

These figures all exclude the financial sector…

EU e-business revenues (both B2B & B2C):

• 2001 revenues estimated to be $86bn;

• 2003 revenues forecast at $382bn; and

• 2005 revenues forecast at $1510bn.

Top Ten E-Commerce Sites in the UK - 12/04Rank Domain Market share 1 ebay.co.uk/ 29.74% 2 amazon.co.uk 7.64% 3 uk.kelkoo.com 2.44% 4 argos.co.uk 2.44% 5 play.com 1.94% 6 euro.dell.com 1.8% 7 tesco.com 1.79% 8 ebaymotors.co.uk 1.64% 9 comet.co.uk 1.04% 10 currys.co.uk 0.94%

Source: Hitwise http://www.hitwise.com & IMRG Jan 05

UK Consumers spent £4bn online in 4Q04 out of total retail spend of £75.8bn

Businesses that placed orders online 2002-2004

Source: UK DTI Business in the Information Age: International Benchmarking Study 2004 Page 74www2.bah.com/dti2004

Note: Business here means businesses representing x% of employment in the relevant country…

Businesses that pay online 2002-2004


Resolution of the Solow productivity paradoxPolicy-makers and economists have long debated the role of information and communications technology (ICT) in the economy. The traditional view in the 1980s and 1990s was that its impact was limited. This was well characterised by the Solow Productivity Paradox that "you can see the computer age everywhere but in the productivity statistics". In the last year this paradox has been resolved. A confluence of new evidence based on analysis of US economic performance in the late 1990s demonstrates a strong inter-dependence and that ICT has had a substantial impact on GDP.

This view has been supported by research by the European Commission that lies behind the claim by Erkki Liikanen, commissioner for enterprise and information society, in October 2003 that "there is more and more evidence that the adoption of ICT is a key to productivity growth. In the US, it has been unusually robust, and has spread to the wider economy." Evidence of a substantial impact on productivity and GDP growth in Europe is much more limited to date. For the first time since 1950 European catch-up ceased and the productivity gap between the US and Europe started to increase again after 1995. Innovation in ICT has a transformational impact on productivity and growth - in the US, ICT produced an estimated one percentage point increase in yearly GDP growth in the late 1990s. Evidence and reasoned argument point to this productivity and growth improvement continuing for many years to come. Applying the same logic to the European economy, ICT could increase our future GDP growth rate from 2 per cent to 3 per cent. ICT can do to our economy in the 21st century what railroads did in the 1800s and electricity in the 1900s. Sectors that are or will be particularly heavy users of ICT - retail, financial services, media and government - stand to benefit most, although the whole economy will profit indirectly. This raises the question of whether policy makers in Europe can do anything to improve Europe's relative productivity performance.

Source: Andrew Heaney of Spectrum Strategy Consultants and Brian Williamson of Indepen, "Reaping the Telecoms Dividend" January 2004. Quoted in the Financial Times 18 Feb 2004


•Measuring national e-business capability.



•Final thoughts.


Market-led approach

A competitive and innovative environment

Internationally agreed tax and regulatory frameworks

Co-ordination and focus across Government Monitoring and evaluation

A framework for analysis..

AccessUnderstanding

Trust

The UK is the leading centre for e-commerce activity within a strong Single European Market, based on openness and innovation by suppliers and customers, light touch regulation, and Government-Industry partnership

Source: PIU Report “[email protected]”

Vision

[email protected]

Individuals... are aware of the benefits

that they can gain from e-commerce and feel confident that they have the skills to exploit them.

are able to use routinely electronic means for Government transactions.

Business and Government…. use e-commerce as an

integral part of strategic thinking in UK industry.

have embraced the tools of e-commerce to develop skills.

Individuals...have ubiquitous, low cost, high

bandwidth, fixed and mobile, access, with an “always on” capability.

are not e-excluded. Almost all, including the disadvantaged, have affordable access.

are no longer barred by limited literacy..

Business and Government….have access through

broadband networks which are nearly ubiquitous throughout the UK.

Individuals...can use networks for e-

commerce transactions with minimal risk of being defrauded.

have minimal risk of being ‘hacked’ or ‘spammed’.

Business and Government….are fully confident in the use

of e-commerce transactions.

have systems which are intrinsically secure.

Can protect their IPR.

Access Understanding Trust

Source: PIU Report “[email protected]”

Assembling the ‘Sophistication Index’

People

Processes

Aw

are

Technology

Environment

Ad

op

t

De p

loy

I mp

a ct


Based on a fusion of the ‘three pillars’ and ‘technology innovation lifecycle’ approaches with 50 sub-indicators.

Defining the sophistication indexThe technology innovation lifecycle approach:

• Awareness - the ability to make an informed decision based on ‘knowledge’;

• Adoption - decision making, ‘ownership’ of, or access to, particular resources;

• Deployment - ‘usage and optimisation’ of particular resources; and

• Impact - the ‘outcomes realised’ from the adoption and deployment of particular resources.The three pillars approach:

• People - the leadership, skills and culture of business;

• Technology - ‘online’ platforms and applications;

• Processes - ‘buy-side’, ‘sell-side’, and ‘inside’ processes, which support specific business functions;

and surrounding them all environment - competition, government, customers, suppliers and other influences.

Source: UK DTI Business in the Information Age: International Benchmarking Study 2004 Page 103 www2.bah.com/dti2004





•Final thoughts.


E-Business benchmark winners 2004


Overall sophistication index scores - 2004


Sophistication index - numerical results 2004


The absolute score differences between nations are generally quite close, in most cases within ten percentage points. Overall the leading nations are Sweden, Ireland, and the UK.

Year on year sophistication index change


UK ICT sophistication index


Sweden tops the league tableIts strengths are environment, adoption, technology process and

deployment…

• Environment - A sharp improvement (six index points) on 2003. Driven by rise from 8 to 18% of in businesses making payments online to Government, and rise from 22 to 35% of businesses interacting with Government through e-mail.

• Technology - Very high internet connection speeds, two thirds of businesses use mobile or remote terminals (up 9 percentage points since 2003 and Swedish businesses are the most consistent implementers of advanced ICT.

• Process & Deployment - 65% of businesses make payments online (up ten percentage points since 2003), 54% of businesses allow customers to order online (up three percentage points), 33% of businesses allow customers to make payments online (up 14 percentage points since 2003).


Swedish people have a strong affinity for new technologies and a familiarity with e-banking and e-shopping.

…followed by Ireland

Doing the basics very well…

• People - Irish businesses are among the most confident that their IT skills are meeting the needs of business and their staff have very positive attitudes to new technologies. 78% believe that their IT skills mostly or completely meet business needs;

• Awareness - 54% of Irish businesses measure the benefits of technology this is up 13 percentage points on 2003.

• Technology & Adoption - the key to Ireland’s high score is the high level of basic connectivity among businesses: there is almost total saturation of Internet and e-mail access. Connectivity amongst small and micro businesses is amongst the highest measured. Ireland also excels in the adoption of more advanced ICT such as WAN, LAN and VoIP.


Ireland’s main liability remains the low penetration of broadband access resulting from low levels of infrastructure competition.

…along with the UK

UK’s strengths are across the board, without any specific leadership:

• People - 53% of UK businesses now measure the benefits of ICT, up 15 percentage points on 2003, They are also being much more proactive about skills development, 69% of businesses that identify skill gaps now use regular or ad hoc training up 19% points on 2003.

• Technology & Awareness - UK businesses have shown a marked improvement in the adoption of advanced ICT, broadband access - doubled in the year, they have also enthusiastically adopted Wireless LANs, VoIP and desktop video conferencing.

• Process & Deployment - UK businesses are deploying ICT more deeply into their processes and operations. Of businesses with an internal network 70% already have or intend to integrate their internal systems to improve information sharing - up 8 percentage points on 2003. Percentages using online banking and invoicing have also increased sharply.






•Final thoughts.


Technology of course makes an excellent servant but a poor master…

As an engineer and director my strong concern is with the process by which increasingly rapid change in technological capability diffuses out into society and the economy…

Source: Jim Norton, COGS Network

Meeting, University of Sheffield, 20/01/03

•Major scope to improve quality and lower cost in product manufacture and service delivery…

•Potential for SMEs to “level the playing field” with large companies…

•Immense potential in sharing “knowledge” across divisional boundaries…

The people dimension…part one

•But poor track record in building systems which align people, systems and processes.

•But in the UK SMEs Were slow to adopt e-business seriously.

•But how to overcome the “knowledge is power” barriers and reward knowledge sharing?

Networked information systems can be either (or both!) a benefit and a curse…

Source: Jim Norton, COGS Network Meeting, University of Sheffield, 20/01/03

•Potential for enhanced information flow and more responsive management exploiting e-mail…

•Opportunity to codify explicit knowledge into attractive expert systems…

•Potential to tailor private and public sector services to individual consumers…

The people dimension…part two

•But widespread poor practice leading to information overload and excessive hours worked.

•But increasing premium on tacit knowledge strengthens ‘clusters’.

•But major absence of the ‘trust’ required to permit the holding and use of personal data.

Networked information systems can be either (or both!) a benefit and a curse…


•Some very successful pioneers - e.g. Oracle (trial financial balance each day)..

•Much scope for more ‘virtual’ organisations and for portfolio working; greater empowerment of individuals.

•Great scope for e-Government initiatives to improve accessibility…

Structural change proves challenging…

•But an enormous number of failed ERP and e-CRM system implementations

•But little sign of serious implementation (or new support structures such as Guilds)

•But very low take up of e-Government services, particularly in the UK…

Organisational change has been slower than I expected..






•Final thoughts.


Some final thoughts….

E-business has not gone away! The excess of gloom on the ‘downside’ was just as wrong as

the earlier excess of ‘hype’. Normal ‘Darwinian’ processes have removed from the

market those who had wacky business plans and little common sense…

E-business is now being integrated into ‘traditional’ business, bringing major cost savings, service enhancements and new business opportunities.

Remember that, in e-business, people and processes are much more of a challenge than technology…

And remember the law of unintended consequences….

Questions & Answers

Slides (in portable document format) available to download from:

www.profjimnorton.com/shef05mba4.ppt

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“Winning in the race for e-business”

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