Structural Transformation

If e-commerce innovation is the cause of a revolution in the rules of business, what is the effect? In short, structural transformation. The results are a growing pace of application innovation, new distribution channels, and competitive dynamics that are baffling even the smartest managers.

As technology permeates everything we do, business transformation is becoming harder to manage because the issues of change play out on a much grander scale. Increasingly, value is found not in tangible assets such as products, but in intangibles: branding, customer relationship, supplier integration, and the aggregation of key information assets. This observation leads to the second rule of e-business.

The ability to streamline the structure and to influence and control the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products.

The rule is the core driver of structural transformation. Ironically, it seems that few companies have developed the necessary information-centric business designs the deal with the issues of business change and innovation. Changing the flow of information requires companies to change not just the product mix, but perhaps more important, the business ecosystem in which they compete.

Unless an enterprise develops an explicit strategy to accommodate the accelerated flow of information, the enterprise will find itself scrambling, working harder and faster just to stay afloat. There is always hope that some magical silver bullet will appear and pierce the walls blocking the smooth flow of information, but that isn’t likely.

Why do successful firms fail? The marketplace is cruel to companies that don’t adapt to change. History shows that organizations best positions to seize the future rarely do so. As Alvin Toffler pointed out in Future Shock, either we do not respond at all or we do not respond quickly enough or effectively enough to the change occurring around us. He called our paralysis in the face of demanding change “future shock”. Too often, senior managers fail to anticipate change, become overconfident, lack the ability to implement change, or fail to manage change successfully.