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4.6 Business model innovation

Finally, ICT enables business model innovation – radically new ways of doing business that are reflected in the structures of an organisation and its relationships.

ICT allows reductions in transaction and interaction costs, which make partnering and strategic alliances more cost effective, and facilitates unbundling of the vertically integrated corporation to enable it to concentrate on what it does best and acquire other capabilities from specialist suppliers.

Prowler Proof Doors

The way in which ICT has been used to fully automate the order fulfilment process (see section 3.4) has created a greater span of control for the company whilst also improving productivity (mainly by replacing labour with machinery). The company is no longer dependent on wholesalers and distributors for orders, whilst also avoiding dependence on the suppliers of pre-cut aluminium for its basic components.

In the increasingly commoditised industries such as food and clothing, ICT has been influential in permeating business boundaries and linking industry supply chains to generate competitive advantage and profit potential.

Returns have been captured by existing, but often new, businesses that see the opportunities in redesigning business models and supply and distribution processes through the adoption, application and use of the communication and information processing capabilities of ICT (Chesbrough 2003b; Christensen 1997; Christensen and Raynor 2003). Again, it is not the technology that delivers the benefits: it is the way it is used by creative and talented managers and entrepreneurs.

In established companies, enterprise resource planning (ERP) systems now play key roles in production, logistics and purchasing. In more advanced stages of integration, individual companies and suppliers may have applications that enable Internet links not only at the borders between companies, but also within specific internal processes.

For many companies, the traditional transaction and information handling is now carried out by a Web-enabled supply chain, which coordinates activities and simultaneous global planning between multiple businesses, both internally and externally. In the food industry, new companies have been created to perform the role of business integrators.

The Internet and e-business affect every step of the process and offer a cost-reduction opportunity. In speed and efficiency of communication and planning, steps that happened in sequence now happen concurrently and collaboratively. Final configuration happens with the customer, and there is reduced inventory, process time and cost.

 

 

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  • Last modified: 5 February 2008, 10:31am