If you think you have plenty of time to develop and execute a killer e-business strategy, think again. Even if your industry has yet to be named the latest red-hot market for e-commerce, it still isn't safe to operate at the leisurely three- to five-year pace of traditional strategic planning.
What's the reason for the urgency?
An explosive combination of ever-faster, ever-cheaper computing power, the ubiquity of the Internet, and the accelerants of readily available capital and entrepreneurs determined to spend it. By the time the revolution reaches your doorstep, the revolutionaries will be hard to see and even harder to stop. Even if 90 percent of all the startups that enter your orbit crash and burn in short order, their impact on your operating model will still be sudden, deep and permanent.
To see just how fast e-commerce can undermine a traditional industry's structure, tune into the drama unfolding now in the recorded-music industry. The four remaining record labels anoint a few performers with contracts, pay them next to nothing, and spread among distributors, retailers, radio stations and promoters the enormous difference between costs to manufacture the recordings and prices paid by the consumer.
The collective forces upsetting this once-stable universe are new standards for high-quality data compression (notably MP3), the increasing speed and spread of the Internet, and a generation of new appliances that can take music off the Net and play it back. The recording industry was quick to dismiss what was initially impractical, inferior technology. But that technology is evolving rapidly, and today there are sure signs of panic.
Already, sites such as MP3.com and Music.com can mediate relationships between artists and their audiences without ever needing to reduce the music to a fixed media, the key source of both cost and market power in the old order.
Without much planning, these developments have created the beginnings of a new way of solving the original problem - getting music from performers to listeners - along with new competitors for everyone.
Andrew Bridges, an intellectual property lawyer at Wilson Sonsini Goodrich & Rosati who successfully defended the manufacturers of the Rio MP3 player, tells a remarkable story of how the industry outsmarted itself and suffered a devastating legal defeat. One tidbit: The Rio case represents the first time in the history of the Recording Industry Association of America that it ever sued someone and lost.
So how do you know if a storm is headed your way? The following few key questions can help you decide.
Are you in a highly regulated market? Regulated markets by definition are not used to operating competitively. So when new competitors show up, the leaders don't know how to respond. Worse, the new competitors often operate outside the regulated structure, turning regulated players' protections into obstacles that make it even harder for them to compete.
In financial services, for example, the pure-play Internet companies have been able to cobble together alliances that offer insurance, brokerage and banking services in ways that incumbent financial institutions found difficult to do under federal banking law. Ironically, the law was written to protect market segments, but suddenly it was doing just the opposite, leading the industry to push hard - and successfully - for its repeal.
Regulated industries have little incentive to invest in technology in the first place, leaving them without the customer and marketing databases that might otherwise be chief weapons in a counterattack. This was a painful lesson for deregulating industries like telecommunications and electric utilities, which have few resources to compete with, beyond expensive, aging physical equipment - also euphemistically known as "stranded assets."
Are you in a fragmented market? Markets with many buyers but no dominant sellers are prime candidates for transformation. They usually operate at high levels of information inefficiency: Buyers have to order from different suppliers, distributors and agents; sellers have to spend a lot of resources processing a large number of small orders across huge geographies.
Markets for many consumer products,
