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Net Ready: Strategies for Success in the E-conomy


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TheWall Street Journal Business Bestseller!

CISCO's secrets revealed!

CISCO is the global standard not just for internetworking but for Web sales strategies that work. CISCO has made itself the pre-eminent player in the new global economy. Net Ready shows how this vibrant company has done it and how anyone else can apply its unique strategies to succeed on the Web. It's not a blueprint but a set of flexible strategies for Web success­­a unique toolkit for every company ready to seize the Internet's limitless business potential. Net Ready explores the 12 tactics that have catapulted CISCO to the forefront,including its trademark concept of "informatization," which involves giving away the product and profiting from the information about the transaction.

The Wall Street Journal Business Bestseller!

"Net Ready offers valuable advice. . . a must read for any company. "

­­Roderick C. McGeary,Vice Chairman,KPMG consulting Services.

"Net Ready turns traditional business paradigms and the New Economy upside down. It's a wonderfully provocative and powerful primer on preparing your business to thrive robustly in the burgeoning E-conomy. "

­­Lawrence A. Bossidy,Chairman and CEO,Allied Signal Inc.

Discover the proven strategies that will get your business ready for the new E-conomy with Net Ready. Look carefully,as the authors did,and you can see the E-conomy enterprise taking shape. The components that make up net ready organizations are well developed at a handful of companies,in their infancy at a few more,practically non-existent in most. Net-Readiness never comeseasy or without a cost. To be sure,it comes easier to some organizations than to others. Even so,the demands of the E-conomy are such that most born-on-the-web companies fail. One of the rare exceptions to this is Cisco Systems. Consultants,executives,and managers alike continue to have a difficult time focusing on the proper opportunities and many companies continue to approach e-commerce initiatives very opportunistically and chaotically.

What has set Cisco apart from the pack? It operates under a unique set of rules for what the authors call the "E-conomy" and these guiding strategies have enabled Cisco to succeed in e-business. Net Ready identifies these new rules,shows readers how to combine them into unique strategies and provides a tool kit for exploiting each strategy. The companies with the most demonstrated ability to execute in the E-conomy have optimized the four most important properties of success in e-business. Leadership,governance,competencies,and technology­­together create the critical quality the author calls Net-Readiness.

Using examples garnered from Cisco Systems and other wildly successful E-conomy businesses,Net Ready presents expert perspectives on:

  • Creating customized net readiness strategies;
  • Identifying the E-conomy business model right for you;
  • Implementing techniques for creating sustainable E-conomy value;
  • Integrating net and business priorities;
  • Aligning leadership and governance models for maximum impact;
  • Using the net to redraw the boundaries of your industry
  • And more
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Product Details

  • ISBN-13: 9780071352420
  • Publisher: McGraw-Hill Companies, The
  • Publication date: 1/1/2000
  • Edition number: 1
  • Pages: 314
  • Product dimensions: 6.33 (w) x 9.33 (h) x 1.37 (d)

Meet the Author

An author, lecturer and consultant, for the past 14 years Amir Hartman has worked at the intersection of business and information technology. He is on the faculty at UC-Berkeley's Haas School of Business, and is a Partner at Sai International, a strategy consulting firm. Amir is the co-author of The Search for Digital Excellence, a book on E-business. He is also the creator of CommerceNet's Inaugural Seminar and course book Internet Commerce: Capitalizing on Business Opportunities and is on the advisory board of Harvard Business School's Annual Internet Business Conference Cyberposium. His research involves fieldwork which develops e-business benchmarks and strategies.

Amir consults with numerous Fortune 500 firms to assist them in building transformation strategies for the emerging digital economy, working with them to build innovative business solutions for sustained competitive advantage. Much of this work is the basis of his forthcoming book with John Sifonis " New Rules for Competing in the Digital Economy." He also has extensive experience managing and consulting with major consulting firm such as EDS, Deloitte & Touche, and Ernst & Young, and in industries as varied as financial services, energy, hi-tech, and healthcare. Professor Hartman is on the advisory board of a number of Internet related companies. His recent consulting assignments have included:

  • Developing a set of Future Scenarios of the Digital Economy for a major management consulting firm in order to create a new offering for their clients.
  • E-business strategy development of global financial services for a major international bank in order to better position the organization as aleading competitor in the financial services sector.
  • Strategy and Scenario Development for clients of leading an e-commerce organization. These scenarios were used to create new opportunities and business spin-offs.

Clients Amir Hartman has served include, Arrow Electronics, BankOne, Blue Cross/Blue Shield, Chevron, Hewlett-Packard, Microsoft, NTT, Nationwide Insurance, Oracle, and others.

Amir Hartman is a frequent speaker at major Internet business conferences and consortia, and has made appearances on television to discuss business trends on the Internet. Amir's seminars on the business value and strategies of e-commerce, have been popular additions to the MBA curricula as well as executive management at major corporations.

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Read an Excerpt

Chapter 1: The Four Pillars of Net Readiness

Net Readiness is a combination- unique to each organization- of four drivers that enables enterprises to deploy high-impact Web-enabled business processes that are focused, accountable, and measurable,

Our development of the concept of Net Readiness follows a rigorous investigation of just what makes Web-enabled companies successful. Stated another way, we wanted to know if there are any commonly encountered barriers to success in the E-conomy. Based on our experience in the past five years, it turns out that there is, indeed, a set of attributes that seems to drive E-business success. At the same time, our research identified a number of attributes associated with barriers to success or with outright failure in F-business. We saw a remarkable consistency in both lists.

We have identified four key drivers that predict an enterprise's ability to succeed in the E-conomy by deploying high impact E-business initiatives. Those four drivers are

  • Leadership
  • Governance
  • Competencies
  • Technology

Taken together, these four dimensions underpin the concept we call Net Readiness. When an organization demonstrates the ability to consistently execute in these four dimensions, we say it is Net Ready.

Net Readiness is a measure of a company's preparedness to exploit the enormous opportunities in the E-conomy landscape. The four attributes combined in an infinite variety of permutations are consistently displayed by the most successful players in the E-conomy. Separately, these four attributes represent prerequisites, or barriers, to E-conomy success. It is unlikely that durable E-conomy success will come to any company conspicuously short in any of these four areas. In the following sections, we take a closer look at each of these dimensions and at what organizations have to do to execute each dimension well. We show how the E-conomy prospects of Cisco Systems-the company with which we are most familiar are furthered by attention to these dimensions.


Think about the outstanding Net Ready companies. Does it surprise you that most of them are so uncannily associated with their leaders? Michael Dell. Jeff Bezos. John Chambers. Bill Gates. As we surveyed the most successful companies in the E-conomy, it became clear to us that, without exception, they all had the benefit of a particular kind of leadership. What are the essential qualities of leadership in support of a Net Ready organization? Is your organization's leadership Net Ready? Ask yourself the following questions and see how often you can answer in the affirmative:

  • Do we solve business process problems first?
  • Is senior management attuned to the opportunities/threats enabled by the E-conomy?
  • Is generating competitive advantage via E-business a top priority of senior management?
  • Are our E-business initiatives integrated with our business strategy?
  • Is senior management involved in, buying into, and participating in E-business efforts?
  • Do we have an E-business vision or road map in the twelve-to-eighteen-month time frame, and is it communicated up and down the organization?
  • Do we have an E-culture (Web-enabled business mind-set) up and down the organization?
  • Do we have a culture of information sharing?

Net Ready leadership starts by empowering every corner of the organization-from the CEO to the custodian-to think and act in E-conomy terms, to use E-business tools, and to hold themselves accountable in measurable ways. The overriding leadership message must be: This organization is a Web culture from top to bottom, and everyone in this business is empowered to do E-conomy. The leader's job is to promote this vision by personal example.

Library shelves are groaning with the weight of books about leadership, so we propose to restrict our discussion here to the essential attributes of leadership that promote Net Readiness in its myriad manifestations. Although leadership in the E-conomy features some new wrinkles, its first goal, like the first goal of leadership in the traditional economy, is to define a workable balance between the visionary and managerial components. Leadership-when spread across functions, hierarchies, and structures -combines strategic thinking (that is, setting the vision, mission, and goals of the organization) and operational leadership (that is, ensuring that all the tasks involved in meeting performance measures are successfully accomplished). We have heard the adage, "A leader is one who does the right things, a manager is one who does things right." In the E-conomy, leadership evolves to a new reconciliation of this polarity. It's not enough to do the right things flawlessly; Net Ready CEOs must do it with a conspicuous display of vision and character. As General H. Norman Schwarzkopf says, "Leadership is a potent combination of strategy and character. But if you must be without one, be without the strategy."

The E-conomy needs leaders who evangelize rather than encourage, empower rather than delegate (see Table 1-1). More volatile business conditions and advances in technology mean that we have to move decision making and problem solving out of the corner office and distribute them throughout the organization.

The stewards of Net Ready companies constantly face the challenge of being barraged with too many ideas, proposals, partnerships, business opportunities, and barrels of cash. It takes a highly focused CEO and management team to navigate these treacherous waves. Cultivating the ability to say "no" is perhaps more important than getting people to say yes. "We get a thousand opportunities a day," says Kevin O'Connor, CEO of the Internet advertising company DoubleClick (see our profile of this company on page 224 in chapter 7). "Strategy is half deciding what to do and half what not to do." The E-conomy demands CEOs who can think paradoxically. The following sections elaborate on tasks that E-conomy leaders must accomplish if they are to succeed.

Solve Business Process Problems First

Begin by solving the business process problems. Your fundamental goal is to define how to better address customer requirements. This goal takes precedence over everything else, including the development of information technology (IT) projects explicitly designed to support these business process improvements. There's good news when you attack process issues first. For example, many traditional order entry functions go away. Most customer service reps take on larger, more challenging customer management roles. In the self-help model enabled by Net Ready process changes, customers and partners willingly take on responsibilities formerly handled by the organization.

Have a High Tolerance for Ambiguity and Chaos

Gone are the days when business was so stable and predictable that long range strategic plans actually made sense. Today, the game belongs to those who can think and act nimbly. When the relationships between the major storefronts in any given industry can completely shift in a matter of weeks, when even the definition of an industry is open for grabs, there is little profit in insisting on maps that refer to past behavior. E-conomy leadership means understanding that the competitive business environment is chaotic, and good leadership (at every level) means being comfortable dealing with the ambiguity caused by chaotic behavior.

At one point in our economy, past behavior offered reliable guidance for the future. Not in the E-conomy. Net Ready leaders acknowledge that the strategic landscape can be neither predictably known nor systematically addressed. Formalized strategic thinking-of the kind Michael Porter recommended in Competitive Advantage as recently as 1985-is doomed to failure in an ever-changing and technologically driven business environment. These facts may be inconvenient, but they apply equally to every storefront in the E-conomy. Advantage, then, accrues to the storefront that can adapt most quickly to the reality that the E-conomy is about change and movement. Net Ready leaders can learn from Epictetus-the first-century Roman philosopher who would have been very comfortable in the E-conomy and who provided the epigraph for this book.

Model E-Business from Top to Bottom

Net Ready companies have leaders who embrace the Web and extend it to every corner of the organization. Cisco's John Chambers believes that everything pertaining to Cisco belongs on the Web. If something's not on the Web, there has to be a good reason. These leaders not only embrace new technologies and new applications that are enabled by the Internet, they push its use within every level of the organization. In one company we worked with, for example, the CEO led the movement toward electronic communication on the company's recently implemented intranet. Although not an expert by any means in the use of E-mail or electronic calendaring, this CEO set the tone and expectation level for the rest of the organization by communicating electronically and refusing to accept written communications for most situations.

Even Cisco experienced a transition in going from a paper-based expense reporting system to their Intranet application, Metro. After the application was operational for several months, the paper-based expense system was eliminated, and it was no longer possible to submit an expense report unless it was done electronically. Such transitions force an E-culture up, down, and throughout your organization.

Avoid Incrementalism

E-conomy leaders realize that they cannot inch their way to Net Readiness. Doing something-customer service, TQM, benchmarking-incrementally better than the competition is useful, but is not a sufficient condition for competitive advantage. Operational excellence, as Michael Porter observes, means that you're running the same race faster. But Net Readiness involves, in addition to operational excellence, choosing to run a different race because it's the one you've set yourself up to win. He points to the dominant storefronts in the E-conomy as classic exemplars of successful strategic thinking. "The average technology company is not all that gifted in terms of strategy. But the most successful companies-the Dells, the Intels, the Ciscos-don't think about strategy as incremental or impossible. They have a clear sense of what they're trying to do and how to do it." Different may not be necessarily better, but better is always different.

Be Early

Net Ready leaders tend to be risk takers; they take on a set of behaviors we call Rule Breaking (see chapter 9 for a fuller discussion of Rule Breakers, Shakers, Makers, and Takers). Not all Rule Breakers are successful (witness Edwin Lands's instant movie flop, Polavision, or Federal Express's ZAP Mail). Federal Express spent millions of dollars on the infrastructure to enable ZAP Mail, a point-to-point facsimile service. Unfortunately, ZAP Mail arrived at the same time as the adoption of the personal fax machine and could never put a dent in the trend for every company to have a fax machine. To its credit, however, the leadership of Federal Express didn't let the failure of ZAP Mail get in the way of trying new rule-breaker concepts such as Internet tracking and shipping.

Engage in Counterintultive Thinking

The E-conomy makes mincemeat of many sacred business values. Net Readiness teaches you that thinking small and acting small is the path to getting big. Net Readiness suggests that success is not something that you aim for. The more you aim at it and make it a target, the *ore elusive it is. Success, like happiness, cannot be pursued; it must ensue, and it does so only as the almost unintended side effect of focusing on customers and partners and serving them meticulously. In the E-conomy, Net Ready leaders let success happen by not caring about it.

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Table of Contents

Foreword xi
Introduction: Net Readiness and How This Book Will Help You Be More Net Ready xiii
Acknowledgments xxix
Part I Strategies for Success in the E-conomy
1. The Four Pillars of Net Readiness 3
Leadership 4
Governance 11
Competencies 19
Technology 26
2. Net Readiness Trends Enabled by the E-conomy 35
Content and Container: The Value Is in the Migration 36
Processes Are Transforming from Simple to Complex 44
Industries Are Shifting from Static to Dynamic as Products and Services Mutate from Tangible to Intangible 45
Customization: Constituents Are Becoming Less Forgiving and More Discerning 48
Distribution Channels Are Becoming More Adaptable 53
New Infomediaries Are Extracting Value 55
In Convergence, There Is Opportunity 58
Digitization: Separation of Function and Form 61
Informatization: Smart Products Are Proliferating 64
Compression: Transaction Costs Are Being Reduced 69
Advantage Is Becoming More Temporary 72
3. Identifying Strategic Options 75
Quadrant I New Fundamentals 79
Quadrant II Rational Experimentation 80
Quadrant III Breakthrough Strategies 81
Quadrant IV Operational Excellence 81
4. Extended E-conomy Business Models 101
The E-Business Storefront 102
Infomediary 105
Trust Intermediary 126
E-Business Enabler 132
Infrastructure Providers/Communities of Commerce 136
Part II Techniques for Creating Sustainable E-conomy Value
5. Product and Market Transformation 149
Reconceive the Product or Service 151
Redefine the Value Proposition 161
Move the Product Up the Food Chain 163
Separate the Function from the Form 172
6. Business Process Transformation 181
Unbundle and Outsource Processes 186
Assume Another Role 188
Compress the Value Delivery System 201
Explode Price/Performance Ratio 202
7. Industry Transformation 207
Redefine the Basis of Competition 208
Become the Channel Enabler 217
Redraw Industry Boundaries 221
Break Unbreakable Rules 223
Part III Net Readiness Realities
8. Net Readiness at Cisco Systems 237
9. Finding Order in Chaos 271
Decide if You Are a Rule Breaker, Rule Shaker, Rule Maker, or Rule Taker 273
Cannibalize Parts of Your Value Chain: Experiment with Eating Your Young or Someone Else Will 282
Be Opportunistic: Initiatives Must Be Continuously Questioned, Improved, and Explained to the Customer 282
Focus on What's in Motion Rather Than on What's Standing Still 283
No One Can Go At It Alone 285
Upside Down: Suppliers and Customers Must Cooperate as Never Before 286
Run, Don't Walk 287
It's the Network, Stupid 288
Smart-size the Offer 289
Think Brand Equity and Channel Equity 290
Planning Is Critical. Don't Do It 291
Appendix A Net Readiness E-Business Planning Audit 295
Appendix B Comprehensive Net Readiness Scorecard 301
Index 307
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Net-Readiness and How This Book Will Help You Be More Net Ready

Look carefully, as we did, and you can see the E-conomy enterprise taking shape. The components that make up Net Ready organizations are well developed at a handful of companies, in their infancy at a few more, practically non-existent in most. Net-Readinessr never comes easy or without a cost. To be sure, it comes easier to some organizations than to others. Born-on-the-Web companies such as eBay or Yahoo have it relatively easier. By virtue of being created in the image of the Net, these companies avoid much of the industrial age baggage with which their more established counterparts must contend. They have don't have to worry about existing channels, sales staffs, and brick and mortar facilities. Even so, the demands of the E-conomy are such that most born-on-the-Web companies fail.

Many of the executives we have worked with over the past five years have struggled with the question of how to compete and win in this new economy. Everyone is looking to score in E-business. Over the past few years, we have encountered countless numbers of managers who want to make their fortunes doing E-business. They want to pursue the newest chapter in the American dream: find a niche, launch an E-business startup, file for an IPO, lose money for a couple of years, and build a large market capitalization. We characterize most of these people, including ourselves, as "Web wannabees" because they have their eyes on the prize of making it on the Net. Unfortunately, E-business is not that simple. Most lack an understanding of the hard work and discipline that success in E-business requires. That hard work and preparation is thestuff of Net-Readiness.

The realities of success in the E-conomy are very different from the assumptions that have guided us to date. Despite appearances, Net-Readiness is not easy. It recognizes that the very basis of doing business has shifted (Figure 1). The drivers of success are elusive, while the drivers of failure are as familiar as our existing management practices. Companies with roots in the traditional economy have a much more difficult experience transitioning to the E-conomy. The promise of the E-conomy frequently eludes these companies because they have difficulty in articulating a clear value proposition, mostly because they are difficult to translate in this new space. Their economies of scale tend to focus on mass markets instead of the one-to-one relationships that the E-conomy favors. Hierarchies in organization and compensation tend to limit their ability to incent people in new and creative ways.

Companies must fundamentally change the way they approach planning and executing. Conventional thinking has us assuming that variables are stable in our marketplace; that boundaries (industry, geographical, etc) are clearly articulated; that the endgame is known or predictable. Moreover, their inertia makes it difficult for them to execute ruthlessly.

By ruthless execution, we mean the ability to define a course of action swiftly and to implement it competently. Based on our analyses of what sets successful companies apart in the E-conomy, ruthless execution is definitely one of the key drivers. But as just a phrase, "ruthless execution" doesn't drive anything except lip service. "Ruthless execution" and other pieces of jargon such as "learning organization" don't mean anything if they are not attached to meaningful, measurable activities. In our examination of Net Ready organizations, we have identified common attributes that contribute to either success or failure. In addition, the realities of the E-conomy require the adjustment of long-held business values and assumptions.

What makes some E-business initiatives succeed while others become virtual toast? And what about the tens of thousands of existing organizations desperately trying to extend themselves into the new E-conomy? These organizations do not have the privilege of starting from scratch. Moreover, while most of the fuss about the E-conomy focuses on consumer activity such as Amazon, eBay, and E*Trade, the less sexy but nonetheless high impact is and will continue to be in business-to-business interactions on-line by well-established organizations who have successfully made the transition to Net-Readiness.

This book offers help to both camps-companies born-on-the-Web and companies moving to the Web. The goal of this book is to explain what the Net Ready organization of the 21st century will look like, how it will operate, and how it will relate to other Net Ready organizations. The book will introduce the concept of Net-Readiness and define its attributes. Net Ready will also identify some things you can do today to prepare for that new order. That said, we want to be clear about what Net Ready will not offer you. If you are looking for advice on the following subjects, please look elsewhere. This book will not help you with:

  • Cool Web site design
  • Selling stuff on the Web
  • Management by buzzword
  • Quick fixes
  • Cookbook processes
  • "Me, too" solutions

Net Ready, however, can move your agenda forward if you are looking for deeper perspectives on the following strategies:

  • Organizing your company for success in the E-conomy
  • Planning and planning tools for E-business initiatives
  • Aligning governance models for optimum leverage of the Net
  • Promoting E-business leadership
  • Linking Net and business strategies
  • Helping identify opportunities for competitive advantage
  • Identifying best practices
How Net Ready is your organization? Are you asking the same questions the companies we talk to regularly ask us (see sidebar)?


The Most Common Questions Asked by Our Clients

  • Which particular E-business opportunities should we pursue?
  • What's the best way to integrate new E-business initiatives with existing processes?
  • How do we measure Return on Investment?
  • How do we define an E-business for our industry?
  • How do we organize structurally to do E-business?
  • What skills and capabilities do we need to develop? Do we grow what we need or do we acquire it, or rent it?
  • How will E-business impact our existing channels?
  • How does our long-term vision of the evolution of the E-conomy impact our business strategy?
  • How do we protect our value chain from competition?
  • How do we react to the inevitable cannibalization of our core businesses?
  • How can we avoid ceding essential parts of our value proposition to new entrants?

Success in E-business is possible. Popular hype about such success-think of the relentless press coverage of Amazon, AOL, Dell, or Cisco-makes it look easy. Nothing is further from the truth. For the media coverage, looking at the facts in hindsight, inevitably makes the success look easy and orderly. The recipe is remarkably similar: Take a visionary leader, preferably young and a college drop-out. Season with a brash idea. Add a dash of venture capital. Cook at high pressure for a couple of years. Garnish with an IPO and serve.

What these entertaining stories ignore-and what this book is about-is the more difficult question of what really are the attributes of success in E-business. Put another way, what happens at the majority of Web-in-the-eyes organizations that seem to follow the recipe but nevertheless fail to meet any of their objectives? As we carefully studied the engagements that led to success and those that failed and everything in between, we started to see some commonalties. We began to compile our observations about the drivers that predicted success in the E-conomy and soon gathered these together into a list of indicators.

Core Attributes that Predict Vulnerability

A revolving door in a crowded office building at lunch time. That's exactly the experience of those conducting business in the E-conomy. The velocity of the rotary motion is not under your control; the occupants are not of our choosing and grasping for any advantage; and the way out gets rapidly confused with the way in so that eventually you feel you are just along for the ride.

Welcome to the E-conomy, an environment that differs from the traditional economy precisely because of that dizzying, uncontrollable pace. It's a different world. The E-conomy's imperative for action negates many of the payoffs the traditional economy assigned to such strategies as early mover advantage, durability, and linear product development cycles designed to protect existing lines. In the digitally-lubricated E-conomy, early mover advantage can be instantly replicated. Netscape successfully transformed its lead in the browser war into a dominant market position but found that position quickly eroded by Microsoft's offering.

Product cycles in the E-conomy are so relentless and parallel. It doesn't make sense to think about the beginning, the middle, and the end of product lines as clearly delineated functions of traditional operations. Activities such as research, design, manufacturing, distribution, and marketing continue, but more as concurrent processes in an endless feedback loop focused on the customer. This year's product has been replaced by constant innovation that drives a continuous stream of versions, upgrades, and improvements. There is nothing built to last anymore when change is prized over constancy.

The half-life of competitive knowledge is shrinking so quickly that it's often better to share it while it still has value than hoard it and watch its value decrease. In the E-conomy, storefronts pay big bucks for advantages that are measured in weeks. When Yahoo acquired Viaweb for $49 million in June 1998, chief operations office Jeff Mallett noted that "60 days is the biggest lead a storefront can have in the online space, and that's that Yahoo will get for its investment."

The lesson is that E-business initiatives are never done, never complacent, always beginning. Your latest offering is always an approximation of reality. The E-conomy loathes maturity the way nature abhors a vacuum. The traditional economy had a four-step product life cycle: gestation, growth, maturity, and decline. The E-conomy has only the first two. Get used to a product life cycle that not only never reaches maturity but doesn't even aspire to it. When your offering has achieved some success, you should already be launching the next new thing that is piggybacking off the last new thing.

In the past five years of our work with Net Ready companies, we also saw many characteristics that revealed how vulnerable these companies were to new entrants poised to compete directly or to seize smaller pieces of their value chain. Here are a few of our most common observations.

Competitive Advantage In the E-conomy, competitive advantage is more difficult to attain and even more difficult to sustain.

  • The E-conomy requires us to continuously identify and execute on new opportunities, rather than try and sustain old ones. Those who have the competencies in doing so rapidly will have a distinct advantage
  • Focus of Internet initiatives on critical business practices is necessary but not sufficient, because E-business initiatives are often easily replicable
  • The E-business bar is rising and going to continue to rise. Initiatives and the business processes they impact need to be questioned constantly and continuously revisited (You are never done!)

Never Satisfied No resting on laurels. Internet initiatives and the business processes they impact need to be in constant question and continuously revisited

  • Change and introduction of new technologies and business solutions cycle every 6-9 months
  • Initiatives must be continuously questioned, improved, and explained to the customer
  • Products, processes, and other key value drivers need to stay in revision and version mode
  • Never done, never complacent, always beginning

E-conomy Deliverables Mission-critical Internet initiatives are necessary but not sufficient because most are easily replicable

  • Companies must be able to transform key business processes via Internet technologies
  • Internet technologies and applications are, for the most part, easier to develop, easier to use, and easier to replicate, rendering any advantage less sustainable
  • Internet strategies must be ruthlessly implemented

Intellectual Underpinnings The expanded E-conomy requires a shift from hierarchical, linear thinking to a more holistic approach characterized by multi-disciplinary rigor and dynamic planning

  • Traditional approaches to planning assuming long-range predictability cannot be sustained
  • Proactive attitude must replace reactive stance
  • Discontinuous change, not orderly processes, is the order of the day
  • E-conomy realities require simultaneous execution and nimbleness to permit real-time shifts in resources and direction

Need for Partnerships Bottom Line: No one can do it alone. The expanded E-conomy requires enterprises to form relationships to compete

  • The E-conomy will punish the arrogant who think they have all the competencies
  • Being able to quickly shore up competencies and act quickly on an opportunity is critical for success in the emerging E-conomy
  • The ability to select partners, create virtual organizations, and dissolve them just as quickly is essential for success in the E-conomy

Early Mover Advantages Early movers accrue advantages when they develop new products/services or create new business models,

  • Early movers get first shot at best talent
  • Being first in a space provides access to the strongest partners
  • First access to venture capital represents a premium. It not only denies competitors the capital, high market capitalization allows companies to make investments in R&D and new acquisitions, eg eBay's purchase of Butterfield Auction and E*Trade's purchase of Telebank Financial.

Drivers of Success and Barriers to Success

In the work we've done, it's become clear that successful Net Ready organizations exhibit certain characteristics while organizations that are less successful or who have failed exhibit a different set of characteristics. Let's consider these two sets of principles. We call them barriers to Net Ready success and drivers of Net Ready success. They are flip sides of coins surprisingly common to many of the organizations that we have observed. We have seen these principles play out in various permutations in virtually all of the clients we have studied Many of the successful companies take on the attributes of the drivers of success. Most of the companies that have been frustrated in their ability to implement E-business initiatives own many of the attributes in the barriers to success.

Barriers to Success

Technology Driven-Letting capabilities of emergent technologies dictate moves. Management by buzzword. Many companies have allowed some of the emerging technologies (e.g, Java) drive what it is they deliver to customers.

Inadequate Architecture (Application/Network)-Companies failing to lay down foundation, plumbing, scalable infrastructure. Oftentimes they have to come in with a forklift to rip it out and install larger infrastructure. Error of not planning for success.

Putting Lipstick on a Bulldog-"Webifying" old bushiness practices/models by sticking on a Web front end without regard to underlying process issues. At the end of the day, they end up with a broken and inefficient process with a pretty user interface (a good-looking bulldog).

Islands of Webification-Creation of discontinuous and non-synergistic applications, pockets of E-business, oftentimes redundant, without driving toward an overall direction. This is a characteristic that is endemic to most companies of any reasonable size.

"Me Too" Strategies-Copying or following the moves of your competition keeps your company in reaction mode. It's a losing proposition because merely replicating what your competitors are doing ensures you of second-class status. While benchmarking provides insights and allows one to catch up, "me too strategies" are often a fast path to mediocrity.

One Time Effort Mentality -Under the old IT paradigm, IT got a project, went away, came back with something two years later, and said "What's next?" This model will no longer do. E-business projects cannot be developed in isolation. Intimate, ongoing participation with end users is required. Projects must be completed in three months or less. Most important, the project can never be seen as done. E-business initiatives are always in a state of redevelopment.

Thinking Too Small-Over-dependence on incremental progress. You can't increment your way to success. Take big steps.

Drivers of Success

Ruthless Execution-Company's ability to identify and execute quickly on these opportunities. Innovative Business Models-Development of new practices and perhaps governance models. Fundamentally reshaping new value creation process, instead of simply slapping a Web front end on existing systems.

Metrics-Driven-Emphasis on activities that can be measured and evaluated

Focused on Immediacy-If it can't be done in, say, 3-6 months, move on to something that can

"Versioning" Philosophy-Recognition of need for ongoing and continuous E-business development and modification.

Customer-focused/Technology-enabled-Having a clear and customer-driven value proposition. Companies must be focused on customer value creation proposition.

Scalable and Standardized Architecture (Application/Network)--Need to create foundation by which organizations can lay in value-creating applications without worrying about disparate systems, data formats, and scalability issues

Vision-Driven-Portfolio of E-business solutions supporting and communicating articulated vision usually in a 12-18 month road map.

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The Internet is driving an Internet economy that is creating unprecedented opportunities for countries, companies, and individuals around the world. In just five years, since the introduction of the World Wide Web, the Internet economy-what the authors of Net Ready term the E-conomy-already rivals the size of century-old sectors such as energy, transportation, and telecommunications,

The impact of the Internet economy is global, reaching both business and government. Business leaders worldwide recognize the strategic role that the Internet plays in their company's ability to survive and compete in the future. To be competitive in this new economy, companies need to harness the power of the Internet.

Through Internet solutions, Cisco has maintained its agility and competitive advantage, All our business operations-from supply chain management to employee communications- are Internet-based. Today, 80 percent of our orders and more than 80 percent of our customer inquiries are transacted over the Web.

As a result, we are growing faster than all our key competitors, have been rewarded with one of the top ten market capitalizations in the world, and are recognized as the fastest growing, most profitable company in the history of the computer industry.

Many of the business practices we have employed to become the leading example of an Internet economy company are readily identified in Net Ready, an important book that analyzes the practices that will move businesses along the road to success in the Internet Economy. Net Ready helps build a road map that can guide companies to take advantage of six key areas that I believe are fundamental in building an Internet-basedbusiness:

Customers. Customers in the Internet economy are well informed, and their expectations continue to increase. Therefore, the ability to respond rapidly to customer demands and deliver value is imperative.

Globalization. The Internet economy is leveling the playing field for big and small companies. This leveling goes hand in hand with globalization.

Being able to deliver consistent value irrespective of geographic proximity is necessary to be successful in today's constantly changing competitive landscape.

Partnerships. The rise of the Internet economy can be tied to an emerging "Internet E-cosystem," a new business model for Internet-connected businesses to serve Internet-connected customers. The open nature of the Internet encourages complementary business alliances that create a unique set of interwoven dependencies and relationships.

Employees. A key change being driven by the Internet is how companies share information with their employees. In an Internet economy company, employees are empowered to make the decisions that are in the best interest of the customers. Only when employees have access to information are they truly empowered.

Culture. The ability to turn change into competitive advantage for your company and for your customers is critical for success in the Internet economy. Of course, at the center of any successful company's culture is also dedication to customer satisfaction.

Access. In the past, information and internal systems have been viewed as strategic assets to be selectively shared. Today, companies must balance the need for both security and open access to information.

The Internet economy is creating tremendous opportunities, and we are seeing individuals, businesses, and countries use Internet technology to reeducate and reinvent themselves. The overwhelming acceptance of the Internet is one of the biggest stories of the 1990s, as this book so compellingly documents. Net Ready outlines the lessons and the steps that many companies have experienced in their quest to attain the elusive quality of Net Readiness.

My challenge to you is, "Are you ready?"

John Chambers
President and Chief Executive Officer
Cisco Systems

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