Five stages of e-business design

Stage 1: The Cross-Functional Business Unit. The driving goal of the organization in this stage is to produce dependable, consistent, quality products and services at the lowest possible cost. In order to accomplish this goal, companies in stage 1 typically focus on automating existing functions and tasks. Most companies are striving to reach this level. The majority of the cross-functional examples found in this chapter (e.g., Whirlpool, CIBC) depict stage 1 companies.

Stage 2: The Strategic Business Unit. Companies moving toward stage 2 concentrate on serving the customer end to end, for example, in order acquisition and fulfillment. Companies in this stage are beginning to consolidate their supply chains in some areas, such as combining distribution and transportation into logistics, and manufacturing and purchasing into operations, with the ultimate units (SBUs) have increasingly taken the role of application strategy formulation away from corporate headquarters, and costs. American Express is an example of a stage 2 company. However, in a high-velocity environment rife with mergers and acquisitions, SBUs can fail to create organizational agility by losing their focus on the organization’s priorities and capabilities.

Stage 3: The Integrated Enterprise. Companies in stage 3 focus mostly on cost reduction and internal efficiency. The driving goal is to be highly customer responsive, leveraging the ability to quickly deliver high-quality products and services at the lowest total delivered cost. Stage 3 companies become highly responsive by investing in operational flexibility as well as integrating their internal supply chains, from the acquisition of raw material to the delivery of product to the customer. Companies implement a strategy of decreasing costs by achieving “preferred partner” status with key suppliers. Chapter 3’s example of Dell Computer depicts an integrated enterprise.

Stage 4: The Extended Enterprise. As companies move into stage 4, creating market value becomes important. Extended enterprise describes a multienterprise supply chain with a shared information infrastructure. The extended enterprise enables supply chain integration, more effective outsourcing, and self-service solutions for both internal and external users. The extended enterprise allows for sophisticated online business processes that interweave line-of-business apps with other internal and external information or sources. The goal is profitable growth, which such companies accomplish by providing customer-tailored products, services, and value-added information. This differences them from competitors. McKesson, a health-care distributor, is an example of a stage 4 company.

Stage 5: The Inter-Enterprise Community. This stage focuses on market leadership. Companies consolidate into true interenterprise communities whose members share common goals and objectives across and among enterprises, using forward-looking technologies such as the Internet. Stage 5 companies are able to streamline their business transactions with their partners to maximize growth and profit. Microsoft Expedia and E*TRADE are example of stage 5 companies.