COLLABORATION COMMERCE AND KNOWLEDGE MANAGEMENT PRACTICAL E-COMMERCE APPLICATION IN GREATER CHINA Wilson Tang C-Globe Technology Inc. Abstract This paper describes an observation to the recent development of global E-Commerce environment and suggestions to practical business models focused on Information Exchange, which can be, related to, though not precisely defined, common categories of B2B, CMC, CPC and PKM. At the heart of global manufacturing collaboration, manufacturers in China, Taiwan and Asean countries supply more than 50% of the components of consumer goods circulating in the worldwide market. This paper also discusses the unique business practice commonly adopted in this area which demands viable E-Commerce solutions be considerably localized and/or customized from its original design, typically developed by the countries in western world.
KEYWORDS ASP = Application Service Provider B2B, B2C BSP = Business Service Provider C-Commerce = Collaborative Commerce CMC = Collaborative Manufacturing Commerce CPC = Collaborative Product Commerce CSP = Collaboration Service Provider E-Commerce EIP = Enterprise Information Portal Internet KM = Knowledge Management PKM = Product Knowledge Management SME = Small and Medium size Enterprise Value Chain Virtual Value Chain
WHAT HAPPENED TO INTERNET BUSINESS? While Internet technologies being widely recognized as one of the most important developments that impact global economy, the rise and fall of Dot-Coms not only shakes Wall Street, but also business executives world wide. Fumbling through this Internet booming, some simply watched, some suffered, some gained, while everyone now is looking for answers to questions such as, to name a few, 1. What happened to Internet Business? Or more importantly, 2. What will happen next? 3. How shall the company react? 4. Can we afford not to react? The author cannot, and has no intention to answer to these questions in this paper, but would like to share the observation that we have learned in the past few years as one of the players in this arena, especially in Greater China market. We believe that answers to the questions will not be correct unless we first take an objective perspective. To do this, we bear in mind that 1. Internet Technology is no magic. Technology takes evolution. Nothing comes fast and cheap. There is a myth that anyone with exciting Internet technology can become a millionaire, or entrepreneur, overnight. Technology alone has no value. It is application of technology that creates
value. Therefore, the evolution of technology actually is a process that we learn how to bring in values to applications of technologies. 2. Customer value still is the base of business. The only reason to change business and working model is that it will increase customer value. Some may argue that Internet technology brings many other advantages. For example, we can substantially reduce cost to become more competitive. There is no doubt about this. The point is that, as Internet effect prevails, the bottom line benefits must turn into pricing advantage to contribute to top line result. As information circulates much faster than before, the market will be more and more demanding. 3. Business is still business. Internet will definitely change the way we do business. But, it will not change the nature of business. Dot-Coms sell their value to venture capitals measured by eyeballs. Despite the controversies, we all know that web browsing does not necessarily mean web shopping. Sales cost is another area where people overlooked. Few Dot-Coms really forecast the additional cost involved in their ideal business model. Having said so, we must not swing from one extreme to the other. Internet technology, and hence E-Commerce, may not change everything, it definitely is, and will keep on, changing the landscape of global commerce. For business executives, it is mandatory to defines corporate strategies to cope with such impacts today, before it is too late. Following the strategic analysis by Michael E. Porter (1985) regarding value chain, we perform the SWOT of E-commence models based on the value created by each link. It shows clearly that most of the Dot-Coms missed the points, unfortunately. 2
FROM WHERE THE VALUE COMES? One of the most common views of the changes that E-commerce and Internet bring is: Eliminating the intermediate links in the value chain. It is always a good idea to remove non-value-added processes, links or units. However, we must carefully examine functions of the intermediaries before we come up with a new value chain or sales channel. We did see some middlemen gone for good. But, we must not think that intermediaries are at original vendors disposal. They are not, simply because they contribute. Unless there is no value at all, taking them out brutally without filling the value gap, simply harms every link along the chain. On the other hand, new business model incubates new intermediaries. This effect is also usually overlooked. We see a lot of intermediate business growing, thanks to Internet and E-commerce business. These new comers take advantage of new technology and value-creation opportunities; have demonstrated substantial power in the delivery channel, forcing upstream and downstream links to accept new terms of trade. In summary, we think it might be more accurate to rephrase the statement to RESHAPING ALL LINKS IN THE VALUE CHAIN In Greater China, Small and Medium size Enterprises (SME) contribute heavily to national GDP and global commerce as well. They play important part in the global manufacturing value chain, or virtual value chain, typically on the downstream end. Major IT initiatives taken by global conglomerates to eliminate the middle links either threaten their survival or demand investment to their IT infrastructure which is usually not economically efficient, or even unaffordable for them. Many of them are now kind of relieved, thanks to the
Dot-Coms, Dot-goes. Nevertheless, reshaping is still under way and everyone must take actions before caught and sunken in the coming waves. It is still unclear what will happen next, when new technologies, and 3-letter words, come alive every month. Let s get back to basics. Business to Consumer (B2C) is now proven to be only applicable to commerce for certain products. E-ticket and E-postal are two good examples. Amazon, e-toy and many others are still struggling or already gone. Even without detail study, we can see that they ignored, or miscalculated, the cost of delivering the goods. In traditional business, cost of logistics is distributed via links along the value chain. Taking the middlemen out certainly reduces the handling cost, but at the same time, increase the unit cost per good delivered. It varies industry by industry, but unit cost of shipping a container of shoes across Pacific Ocean must be much more cheaper than taking 3-day courier to deliver one pair of shoes to the door step of the consumer. If, unfortunately, the final selling price turns out higher than the old model, it means you can only sell your shoes to someone who can not buy the shoes he likes conveniently, and is willing to pay more for it. And, without proper service offering, the prospect must also hate shopping, and never doubt that shoes of right size might not fit. This is particularly true in this part of the world, where people can buy almost everything he needs within walking distance. There are other factors such as buying behavior, credit issues, quality and rebate. So, it is quite safe to say that B2C in Greater China will not be as prevailing as other market in the world today. It may change some day, seeing the fact that this world is catching up with unprecedented speed. Before there is a real market, it might not be a good idea for every company to take initiatives to become an Internet Company. So, how shall we react? For SMEs in this part of the world, converting the business model to secure and increase their value along the virtual value chain 2
is no easy task. It takes more than money, technology and people. It takes time, too. SMEs typically are on the downstream side of virtual value chain, and they actually works in a supplier web. Opposing to commonly adopted concept of supplier chain where 1 to 1, or 1 to N model is considered, they lived in an N to N environment. To avoid possible confusion, we would like to call it supplier web. In this metaphor, each SME is a node, or a knot on the web, no longer a link in the chain. Perceiving that efficiency advantages must go beyond the four walls of company to maintain competitiveness, Original Equipment Manufacturers (OEM) are taking IT programs expecting stronger competences of entire supplier chain. It is far more difficult than estimated. Try imagining pulling a web straight in one direction. SMEs here already feel the tension imposed on them, but see no clear way to break out. Our study shows that in such a supplier web environment, there cannot be a practical B2C business model without a solid foundation of B2B infrastructure. The heart of B2B, regardless of e-market place, e-procurement, and many other new approaches, really relies on information exchange. Not to be too ambitious, we should focus on that. Trading is never easy and straightforward. Ask a senior salesperson, he/she will tell you how deals are done and how sophisticate and unique each deal can be. Internet Technology is best at delivering and distributing information. Before we know how to build the transporter Captain James Kirk uses in USS Enterprise, transporting physical objects still has to be the way it was. Dealing with information exchange throughout the value creation processes is what Collaboration Commerce is all about. Before worrying about business model, on-line transaction, logistics, e-procurement, it is more practical to leverage the value that Internet Technologies brings to our current business model. 3
INFORMATION EXCHANGE, COLLABORATION AND KNOWLEDGE MANAGEMENT Contemporary Internet Technologies provides unprecedented progress to information exchange. The value of applications of Internet Technology to information exchange shall not be underestimated. It is well known that Information is Power. We either control the power, or lose ground watching competitors in the play. The difference between C-Commerce and E-Commerce really lies in focus. C-Commerce provides solutions to improve information exchange among links over virtual value chain, while E-Commerce talks more about commercial activities over Internet. In a broader sense, C-Commerce can be regarded as part of E-Commerce. It is really not the point the author wants to make. The use of terminology must serve the purpose of delivering the message. What are the values of improved information exchange to the business players in a supplier web? 1. Improved competitiveness by better efficiency of each value creation processes. Each process in supplier web environment involves multiple parties. C-Commerce solution provides much faster and reliable mechanism to achieve better performance. 2. Provide decision support for improving the processes. As the landscape of global market changes rapidly, a responsive information system provide executives fundamental support for improving and optimizing their value creation processes whenever market demands. 3. Enhance market exposure and hence, more business opportunities in the community. In the supplier web, all players are related in some way and to
some extent. Sharing information with one another conveniently helps building and strengthening the connection. 4. Affordable IT infrastructure cost. It is much economically efficient to focus only on C-Commerce at the beginning than to establish an e-marketplace or e-procurement system. The latter involves too many uncertainties in a changing world like this. Furthermore, there is not much difference in technologies applied. Repeated investment will not be an issue. Besides values described above, C-Commerce solutions also bring an intangible but important benefit. That is, it helps build the foundation for knowledge management. CREAT PROGRAM OR BUSINE DATA INFORMATION KNOWLEDGE CONTEXT REUSE MEANINGFUL RELATIONSHIPS REQUIREMENTS & PROCESSES Fig. 1 In the age of Internet, when there are so many happening and so many uncertainties, innovation plays the most critical role for business development ever. Innovation grows out of knowledge. This is the reason why so many companies refer knowledge as corporate memory. Figure 1 shows the evolution path of knowledge from data. 2
From another perspective, Arthur Anderson s formula of knowledge is K = ( P + I ) S Where K : Knowledge P : People + : Technology I : Information S : Sharing Not surprisingly, sharing and reuse are the two major terms in the equation. To accumulate valuable knowledge, effective management of data, information and process, where data get turned into information, is the key. It can be seen easily that the same term shows up again in the equation, information exchange. In the supplier web model as described, C-Commerce solutions make sharing and reuse of knowledge possible among nodes. As a conclusion, C-Commerce solutions bring to SMEs the entire value chain competitiveness, including 1. Shorter product development cycle 2. Less reworks due to improved communication 3. Tighter connections among players in the community 4. Lower inventory cost due to better logistics arrangement 3
5. Valuable knowledge that accumulated via information sharing 6. More business opportunities from nodes that are hard to reach before 7. Lower entry barrier for the path to a full deployment of E-Commerce system when time is right. 4
B2B, BACK TO BUSINESS Seeing the stock price of Yahoo dropped from its top value of more than 300 USD per share to less than 15 USD, I cannot help remembering this comment from one of my friends. He said B2C stands for Back To College, and B2B means Back to Business. This paper is to share our observation of current development of Internet business environment and propose a practical application of Internet technologies for the majority of enterprises in Greater China. The author must emphasize that there is no intention to criticize any business model E-Commerce companies is taking. Internet age is just starting and all of us are learning. Some may take a painful way and the others are simply luckier. As said before, any technology takes evolution to derive valuable applications. Every player, every success and failure, contributes to the growth of Internet technologies that will unquestionably change the world and our lives. The history of Internet itself is the best evidence that nobody can clearly see where it will go and how big the potential is. As a business executive, facing such a forthcoming revolution, actions must be taken bearing in mind all the lessons we learned and shared. And do it today. 4