In the July issue of DM Review, this column highlighted the interconnected roles of the supply and demand sides of the total value chain. The supply chain, which includes product development and manufacturing, is managed through enterprise resource planning (ERP) and supply chain management (SCM). It focuses on streamlined resources, maximum efficiency and cost containment. The delivery chain concentrates on marketing, sales and service. This addresses the customer's perspective and is integral to fulfilling customer needs. Together, supply and delivery provide customers with a total solution. Together, all of the companies in this value chain comprise a market ecosystem that facilitates customer selection, purchase, implementation and use of a product.
It is important to note that a market ecosystem is different for each product and corresponding target customer. One size does not fit all, i.e., one market ecosystem does not reach all customers.
Most companies investing in e- business tend to enter into strategic partnerships on the supply side. The types of supply-side partners and their roles or added value are suppliers who provide raw materials and products, and technology which augments the solution.
These are product-oriented relationships that focus on technology. They may round out the solution, but do not adequately address users' requirements. A supply chain or technology-oriented focus limits adoption of new technology.
E-business is a new paradigm that requires people to change the way they think and the way they do business. Advertising and relationships with strategic supply chain partners is not enough to motivate people to change their behavior. The delivery chain relationships that address customers' acquisition and implementation needs are at least as crucial to success as the solutions themselves.
Working with partners on the demand side allows companies to reach new customers and better serve existing ones with fewer resources. The type of partners and their roles on the demand- side include:
- Market Influencers (associations, analysts): Recommend products and drive market acceptance of new product categories.
- Instructors: Provide education. Lead seminars.
- Resellers: Take orders. Provide configuration.
- Consultants: Provide pre-sales needs analysis, customization and post-sales implementation.
- Training: Teach customers to use the products.
Most demand-oriented partners increase visibility and credibility for the company, product and new technology.
Why Develop a Market Ecosystem?
Many e-businesses believe customers will get everything they need from the company Web site. These companies mistakenly rely on the Internet to provide all of their customer services. E-business will revolutionize how our society does business in the future. It will bring efficiencies and capabilities previously unimaginable.
The primary reason to build a complete market ecosystem is that it will increase acceptance and efficient use of this new paradigm which ultimately will improve results.
Results Possible. Companies are teaming with technology vendors to build Internet-based systems to better manage their supply chain and more effectively reach customers. Daimler-Chrysler AG recently announced eCon-nect. Their e-business solution will be available to its 4,100 internal users and 5,000 people external to the company. They expect to shorten product development time and improve quality while saving over $1 billion in product development costs per year. Roger Lundberg, director of Chrysler's Development System and Vehicle Engineering Operations, said, "Everyone in the industry is trying to cut costs and time to market. This system will enable us to do that and improve quality."
This type of market-specific system is a good start toward meeting a specific need. The technology solution in and of itself will not create widespread adoption within these companies. The next step for IT and the vendors involved will be to build the demand-chain partnerships that facilitate adoption of the new technology by the company's internal users.
Increased Use. Training can be used as an effective part of the implementation process to increase use of the system and improve results. Mike McCaghren, senior vice president and CIO at JumboSports, a sporting goods retailer, describes the initial failure of a new system and its ultimate route to success. "The company went through all of the steps to select the system. They had a system integrator conduct the needs assessment. Senior management and some line managers were included in the process. But, they didn't have the buy in needed at the store level for the new system and employees were misusing it," said McCaghren.
"To correct this problem," McCaghren further states, "we implemented an extensive training program for our district and store managers, where we emphasized the importance of the new system to the business. We've since reduced inventory by $70 million and reduced labor expenses by $1 million per year. These results would not have happened without our attention to the users and training them."
Companies that want to increase adoption of their e-business solution will get faster results by building and supporting the total market ecosystem, both the supply and demand sides, to address the users' selection, implementation and usage requirements.
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