The Seven Steps to Nirvana: Strategic Insights into Ebusiness Transformation

The Seven Steps to Nirvana: Strategic Insights into Ebusiness Transformation

by Mohan Sawhney, Jeff Zabin

Today's most successful companies never sit still. Even as they introduce their newest e-business initiatives, their next generation of improvements is already near completion. Traditional organizations-especially larger, low-tech businesses-must reinvent themselves if they are to hold their positions against these new business competitors.


Today's most successful companies never sit still. Even as they introduce their newest e-business initiatives, their next generation of improvements is already near completion. Traditional organizations-especially larger, low-tech businesses-must reinvent themselves if they are to hold their positions against these new business competitors.

i>The Seven Steps to Nirvana leads managers through the systematic stages needed to transform traditional businesses-regardless of their industries-into fierce competitors. Combining hard-hitting analyses with case studies of businesses that made the transition, this concrete, practical tour de force opens readers' minds to:

  • Essential differences between e-commerce and e-business
  • The evolutionary stages of e-business intervention
  • Strategies to overcome inertia and organize for speed

Written by one of BusinessWeek's 25 most influential e-business innovators, The Seven Steps to Nirvana is a trove of innovative techniques for brick-and-mortar businesses to meet—and overcome—the challenges of today's faster, nimbler e-upstarts.

Insights and Frameworks for Transforming Traditional Bricks-and-Mortar Operations into Fast-Responding, Customer-Centered Companies

In the world of e-business, "e" is just the means. "Business" is the end. The fundamentals of business have not changed. Firms still win by creating superior value for their customers and by building superior business architectures. Executives who lose sight of this fact—whether due to technology, bureaucracy, or the gold-rush mentality—risk becoming disoriented and even lost.

The Seven Steps to Nirvana is a compass for senior executives as they embark on the journey of e-business transformation. Tested before thousands of executives, whose collective insights helped shape its content, this visionary book provides a systematic roadmap for the steps needed to convert large, established companies into fierce, twenty-first-century competitors.

Steeped in ancient wisdom, grounded in a powerful array of sense-making frameworks, and brought to life through dozens of real-world examples, The Seven Steps to Nirvana brings clarity and insight to a wide range of strategic issues, including:

  • Understanding the true scope of e-business
  • Defining the evolutionary path for your e-business initiatives
  • Formulating a winning e-business strategy
  • Finding opportunities for leveraging the core business
  • Synchronizing customer touch points and resolving channel conflict

Editorial Reviews

Business Week called author Mohan Sawhney "a John Maynard Keynes for the new age: A theorist ready to bet on his ideas." In The Seven Steps to Nirv@ana, Sawhney and coauthor Zabin show that such comparisons are much more than journalistic bravado. They describe their lively book as "a parachute that organizations can strap onto their backs as they make their initial descents through the upper strata of strategy formulation and into the most context-sensitive layers of their specific business situations." This vivid image is representative and true: Managers of late-starting, low-tech enterprises will welcome this book's striking e-business lessons and its promise of a safe landing.

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Read an Excerpt

1: E-Vision: Broadening the View

You must scale the mountain if you would view the plain.
-Chinese proverb

We look at the world through lenses. Our vision is clouded by a residue of assumptions that has built up over time due to continuous exposure to our own sets of experiences and observations. Our bias is unavoidable; in a sense, we are prisoners of what we know. So while it may be true that "seeing is believing," also bear in mind that what we believe constrains what we see. Consequently, we must not only become keenly aware of our lenses, but we must make sure that they are cleaned. By removing the residue, we can reduce the risk of confusing lenses with eyes and assumptions with facts.

As firms grow, their mental models become deeply entrenched, and the business models that have worked for them in the past can become gospel that is never questioned. However, to observe a new phenomenon like e-business, it becomes necessary to break free from the mental models upon which these firms have come to rely and that guide them in their day-to-day understanding of how customers, businesses, and suppliers interact and transact with one another. A classic Zen story tells of a scholar and a Zen master meeting over a cup of tea. Before the two men even sit down, the scholar launches into a recital of lengthy passages from old lectures. He talks, on and on, and meanwhile the Zen master pours. And pours. And pours. Finally, his legs and feet soaked with tea, the scholar pauses long enough to look up and see that the Zen master is smiling. "Why do you continue to pour when my cup is overflowing?" asks the scholar. The Zen master replies: "How can I teach you anything about Zen when your cup is already full?"

To empty our cups is to not only discard an accumulation of age-old notions around success factors for creating value and achieving operational excellence, but to actually promote the questioning of assumptions and the killing of sacred cows. Given the inescapable hype about how "the Net changes everything," it should come as a revelation to nobody that for many companies the lessons of history-the time-proven approaches to capturing customers and revenues-no longer apply. The very notion of "time-proven" is fast becoming an anachronism. Even the most casual observer of contemporary business trends, as reported in the mainstream press, knows that the laws that govern "what works and what doesn't" are today very different from what they were yesterday, and that the gap is certain to widen over time.

Cleaning the lens means looking at a legacy business and being able to see a whole new set of possibilities, many of which exist, at least for the moment, only within the realm of the imagination. But besides seeing differently, which is to embrace Marcel Proust's contention that "the only real voyage of discovery consists not in seeking new landscapes but in having new eyes," it also becomes important to see different things, which means also seeking new landscapes. How? By broadening the field of view, or expanding the range of the radar screen, by thinking broadly in terms of the scope and magnitude of the impact that will result from e-business initiatives. Finally, because growth commonly breeds bureaucracy and dilutes the incentives for individuals to innovate and take risks, cleaning the lens and broadening the field of view means wiping away the organizational myopia that often comes as a by-product of success, and rekindling the entrepreneurial spirit that will help the elephant remember how to dance.

The creation of an e-vision is the first step in making the transformation from business to e-business. As Alice in Wonderland's Cheshire Cat so deftly observed, if you don't know where you're going, any road will take you there. In the end, the new vision-if truly visionary!-may bear little resemblance to the existing business architecture. And bringing it to fruition may require more than just an incremental upgrade. In many cases the journey from here to there, from vision to implementation, may mean dismantling and rebuilding from the ground up core business processes and technology architectures, as well as channel structures, departmental functions, and employee performance incentives.

E-Business Is Business

Recently coined, yet already clichéd, the expression "e-business is business" speaks the truth-despite an opportunistic Big Five consulting firm having registered it as its own service mark! In fact, as pundits the world over have well observed, the word e-business stands to enjoy a life span perhaps only slightly longer than that of your average goldfish. To speak of e-business a few years down the road will sound foolish; the "e" will simply stand for enhanced or everyday. At that point, e-business will have become ubiquitous-and invisible. Until then, however, during this somewhat confusing and unsettling period of transition, as companies everywhere scramble to gather their bearings and find their new place in the world, "e-business" is a verbal crutch-in much the same way that "horseless carriage," a term that came into popular usage at the dawn of the last century, created a cognitive bridge before the concept of the automobile could fully take root in the American psyche.

Like the impact of the automobile, which revolutionized far more than just the transportation industry, e-business is anything but an isolated event, touching a smattering of companies in a handful of markets. If its impact has yet to be felt close to home, be forewarned: It's coming soon to a business near you. Moreover, it's not a comedy. The director Alfred Hitchcock once remarked that his mission in life was "to simply scare the hell out of people." This, in essence, has been the effect of e-business on a massive audience of corporate executives. Following years of discounting, ignoring, and even dismissing the potential threats posed by fast-moving companies unconstrained by clouded lenses and legacy businesses, few among them have not by now come to understand that the equivalent of a Travelocity (travel), Wells Fargo (retail banking), Enron (energy), or Charles Schwab (financial services) may well lurk somewhere in their industry. Make no mistake: The genie is out of the bottle. E-business tools are everywhere that you want to be, to borrow a phrase from Visa, available to current competitors as well as to new players in the wings, awaiting their grand entrance onto the stage.

Timing is everything. At least so it seemed until the spring of 2000, when the tables abruptly turned on the dotcom insurgents, bringing their boisterous party to an eventual halt. For the several years leading up to that point, conventional wisdom had been that a lead time of even a few months could make for an enormous head start, to the point that catching up would pose a nearly impossible challenge for those who trailed behind. Pointing to rising stars like eToys (toys) and E*Trade (investing), analysts predicted that the slow-moving bricks-and-mortar incumbents would simply have to learn the hard way about the dynamics of increasing returns-that is, successes that continue to mount at a disproportional rate-that supposedly went with being the first to market. Lending credence to the contention that slow and big lose the race, author Kevin Kelly put forth the notion that significance precedes momentum.1 Using the metaphor of lily leaves on a pond, he asked his readers to compress a season into four days, while imagining that the number of lily leaves doubles every day. The first day you venture out to the pond, no more than an eighth of it is covered with lily leaves. Naturally, you barely notice. The next day a quarter of it is covered; still, you pay no attention, except perhaps to note the beauty! The day after, half of it is covered, and at this point it finally dawns on you that a major transformation is under way. Before you can even think to react, let alone mobilize your forces, another day has gone by, and now the entire pond is covered with a blanket of lily leaves. Kelly suggested that by the time a company became aware of the severity of the change disruption unleashed in its environment, it was already too late to do a whole lot about it.

However eloquent the insight, it fails to adequately predict the reality of who wins and who loses in e-business. With all due respect to Poor Richard, it is not always the early bird that catches the worm, which in this case amounts to an ability to generate sustainable businesses and profits. Rather, the prize invariably goes to the first to get it right. Few get it right the first time around. The reasons for failure can range from issues of funding and timing to vision and even positioning. Consider Motorola's Iridium project: Aiming to provide cellular phones with global roaming capabilities to the mainstream market, Iridium no doubt would have done better with its $5 billion investment if it had instead targeted underserved vertical markets, such as geological surveyors or military personnel stationed in remote locations that lacked readily available substitutes. Or consider the humbling experience of the pure play dotcoms in a wide range of businesses, including banking and retailing. With very few exceptions, traditional assets such as brands, retail store presence, and buying power have proven to be more than enough to counter the initial lead of the startups. In the final analysis, significance may well precede momentum, but for it to matter, profitability must follow close behind.

Of course, that first movers frequently stumble and fall before ever crossing the finish line is the way of the world and not merely an e-business phenomenon. History shows that pioneers often end up with arrows in their backs; it is those who move swiftly and wisely down trails already blazed that generally reap the rich rewards. Examples abound. Quicken, for instance, was far from being the first personal finance software package to be launched in the consumer market. Similarly, Sega's Dreamcast may have been the first to enter the video game console business, but its early refusal to support DVD-ROMs caused it to lose its footing, allowing Sony and Nintendo to race ahead.

As the century drew to a close, the dotcoms were widely hailed as the paragons of speed and agility. To borrow a phrase from Muhammad Ali, they could dance like a butterfly and sting like a bee. Launched by fresh-faced kids out of garages, eToys,, CDNow, and many others did, in fact, manage to bloody the noses of their bricks-and-mortar heavyweight rivals. Yet in a world where stamina is largely a function of expendable energy, also known as capital, many of these same startups, failing to capture value from their activities in the form of operating profits and seeing their funding spigots run dry as a result of this not-so-trivial shortcoming, simply ran out of steam. Meanwhile, from the perspective of the established companies, getting one's nose bloodied tends to have a focusing effect. Major corporations that could only watch in dismay as their businesses failed to be rewarded by the capital markets-which, for a brief period in history, had repealed the rules of business and the laws of economics-have recently begun to pay a certain amount of attention to their fast-footed rivals, to the point of copying some of their moves.

That so many of the dotcoms with disruptive businesses ultimately saw their valuations stumble and fall to the point that they could no longer carry on the attack, at least not as a solo effort, again suggests that at the end of the day the winner is likely to be not the first mover but the first finisher. Being the first mover might only prove to the competition that stirring the hornet's nest can cause one to get badly stung, evoking a grateful response of "Oh, thanks for showing that to us."

Increasing returns confer upon a company an advantage along only one dimension of a business-usually, customer acquisition. But what if a company coming from a completely different direction could easily replicate that advantage? Fact is, the customers that the dotcoms spent so much time, money, and effort trying to "acquire" already have relationships with existing brands and companies. These analog points of presence-the billions of store visits to Wal-Mart, the billions of hamburgers served by McDonald's, the billions of boxes of Macaroni & Cheese sold by Kraft Foods-may ultimately prove to be far more powerful than the pure play websites that have depended largely on banner ads and desperate TV campaigns to drive traffic. Only now, it seems, are the established companies waking up to the untapped potential of their brands, their customer relationships, and their domain expertise.

Every company wants to "get it right." But in a world where new businesses are constantly emerging and the lines between opportunity arenas rapidly blurring, what does it mean to get it right? Arguably, grand master Garry Kasparov got it right during his fifteen-year reign as world chess champion. Before losing the crown to his former protégé in November 2000, he had been the best at his game-with one minor hiccup. That hiccup came in 1997, when Deep Blue, an IBM RS/6000 computer, took the contest to a whole new level. But however formidable an opponent, Deep Blue nonetheless adhered to the same rules of engagement as Kasparov. Neither opponent was allowed to deviate from the universally accepted parameters by which they could move their chess pieces. In contrast, e-business ushers in not only the possibility of superior opponents playing the game, but ones actually playing a different game-for example, Star Trek tri-dimensional chess, in which case the chess pieces can move in myriad new directions. Given that disquieting possibility, long-term success would seem to depend as much on "getting it right" as it does on "keeping it right," even as the dimensionality of the game expands.

Today there is no such thing as sustainable advantage. This notion has given way to leverageable advantage, which means using the position that has been secured on one hill to take the next hill and the next and the next.2 Using its existing assets as a springboard, Microsoft is an example of a company that has repeatedly jumped-to paraphrase its own tag line-from where it is to "where it wants to go today." In its incessant quest to take new hills, Microsoft has leveraged from operating system to office to networking applications, without ever leaving any of its previous hills undefended (and, in fact, Windows and Office remain its biggest cash cows). Novell, by contrast, failed to take new hills, remaining king of the local-area-network (LAN) market even as the Net steadily chipped away at its core business. The questions every established firm must ask are: In what new directions can we take our business? What are the leverage points? What are the springboards that we can use? What is the next hill that we need to capture?

Getting Oriented

"The beginning of wisdom is the definition of terms," wrote Socrates. Putting a stake in the ground-or, rather, the quicksand-we offer the following definition for e-business: The use of electronic networks and associated technologies to enable, improve, enhance, transform, or invent a business process or business system to create superior value for current or potential customers. Important here is the fact that we regard e-business and its tool kit as a means, not an end. Just as all roads were said to lead to Rome, all e-business initiatives must eventually translate into a concrete value proposition for current or potential customers. The customers should be the raison d'être for any e-business initiative. Gary Vanspronsen, Executive Vice President of New Offer Development at office furniture maker Herman Miller, says it well in describing his company's approach: "The only question we keep constant in our e-business initiatives is: How can we create new customer value propositions or dramatically enhance our existing value propositions for customers? We begin with a vision of a better future, by imagining what we want to do for our customers. We don't worry about the means, the technology. We know that if we can dream it, someone has or will soon have the technology to make our vision a reality."

In terms of impact, the outcomes of e-business can range from incremental improvements to an existing business process at one end of the spectrum to the creation of entirely new business systems at the other end. This latter possibility is one that transcends the normally expected outcomes of a typical business initiative-cheaper, faster, better-to radically redefine the competitive game within an opportunity arena. Implicit within this expanded definition of e-business is a set of scope issues that extends along four dimensions-what, who, where, and why. Along each dimension it is possible to think narrowly, think broadly, or think very broadly. These four dimensions-what is the nature of the connection being made, who are the entities being connected, where are the e-business applications located, and why are the e-business initiatives being conducted in terms of expected outcomes-correspond to the four directions of the e-business scope compass, as shown in Figure 1-1....

What People are saying about this

Phil Condit
Phil Condit,Chairman and CEO The Boeing Company
When I took a look at Boeing's interaction costs and discovered that e-enabling the business could save as much as 50 percent, I became an instant believer. Anyone still sitting on the fence ought to read this book.
Melvyn E. Bergstein
Melvyn E. Bergstein, Chairman and CEO DiamondCluster International
The Seven Steps to Nirvana is an invaluable compass for enterprises as they chart their course on digital strategy. It stands tall above the hype and confusion surrounding e-business.
Jack M. Greenberg
Jack M. Greenberg,Chairman and CEO McDonald's Corporation
Mohan Sawhney has provided inspiration to me and my colleagues. This book is written for real managers in real business.
Philip Kotler
Philip Kotler,S. C. Johnson & Son Distinguished Professor of International Marketing Kellogg Graduate School of Management
This book provides the best roadmap I have seen for harnessing the power of e-business to leverage your company's advantages. Sawhney and Zabin present customer-centered business models for an e-enabled world, a refreshing change from technology-centered books.
Ravi Kalakota
In a clear and compelling style, Sawhney and Zabin provide a cogent roadmap to navigate the challenging world of e-business without losing sight of the timeless elements of management.
—(Ravi Kalakota, Ph.D.,CEO, E- Business Strategies, Author, E-Business 2.0: Roadmap for Success)
Patrick G. Ryan
Patrick G. Ryan, Chairman and CEO Aon Corporation
Sawhney and Zabink present an excellent, customer-focused framework for guiding every company's inevitable foray into the world of e-business. The book could become the premier strategic guidebook for planning and managing e-business initiatives within traditional companies.

Meet the Author

Mohan Sawhney is the McCormick Tribune Professor of Electronic Commerce and Technology­­and director of the Center for Research on Technology, Innovation, and E-Commerce­­at Northwestern University's Kellogg Graduate School of Management. Named by BusinessWeek as one of the 25 most influential people in e-business, Sawhney is an internationally renowned consultant, writer, teacher, adviser, and speaker.

Jeff Zabin is an independent writer and speaker, and a research fellow with DiamondCluster International, a premier business strategy and technology solutions firm. He is a co-founder of an e-business thought leadership network, called nMinds, and a strategic advisor to several technology and e-commerce companies.

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