The subject of debate over many years, technology now makes the extended supply chain possible - facilitating the integration and active collaboration of different players in the channel (Berger and Gattorna, 2001). This new technology enables the creation of visibility, real time planning, and the co-ordinated execution of activities across channel partners. The new approach will require a fundamental cultural shift. It no longer takes years of work and billions of dollars to establish a business with global presence. Organisations such as Amazon.com have achieved significant brand status very quickly.
The evolution of e-commerce can also be tracked by its impact on buyer / supplier power. Where buyer and supplier power are both high, there is an opportunity for mutual and direct partnership. Where they are both low, channels such as distribution agents and spot auctions can be used. Where an imbalance exists, there are clear opportunities for e-commerce to change that balance of competition.
The rules of competition are being transformed - companies can no longer rely on the same tried and tested formulae. The competitive landscape is shifting from the best and the rest (intra-industrial competition) to inter-industry partnerships and alliances (the best with the best). (Berger and Gattorna, 2001.)
Such competition is not new - but the speed of decision-making and execution enabled by new business models will be. Value chain competition will challenge traditional organisations and punish those companies that are slow to react. They will be required to do what they do better, faster and more consistently and multiple activities will need to be co-ordinated just as speedily and consistently. Value chain networks make sense, but this means assembling the right portfolio of partnerships.
The focus will be far more on the experience and the service, with value no longer residing in the metal or the engine, but with the intangible elements. Some 70 per cent of the value of a new car lies in intangibles (Economist 28 September 1996). So knowledge really could be the competitive advantage of the future.
In 1776 Adam Smith pointed out that as the size of a market increases, so should the degree of specialisation. Two centuries later there are no more geographical limits to push - we are there. Global competition in an over-supplied world with increasingly perfected markets kills average product offerings and performers. In a society where money flows freely across borders, the shareholders will accept nothing less than consistently high value growth. But we have to stop believing that organisations can master all things and all situations on their own.
Copyright Partnership Sourcing Ltd 2001. All rights reserved.