CHANGE, MANAGING

Traditional brick-and-mortar enterprises are finding it necessary to adopt some sort of e-business strategy as the Internet continues to become a powerful venue for exchanging information as well as for buying and selling products and services. According to Forrester Research, business-to-business e-commerce alone is predicted to generate $1.3 trillion by 2003. Managing the changes that go along with integrating traditional business strategies and e-business plans, however, can often be a multi-faceted and challenging task. Nevertheless, the ultimate goal for many enterprises embarking on an e-business mission is to become a holistic Internet-enabled entity. This entity is one that has fully integrated its e-commerce initiatives into its corporate vision.

Whether simply creating a company Web site or developing a plan to provide products and services via the Internet, an enterprise entering the e-business world is faced with several major issues. Developing an e-business vision and strategy, training employees, adapting to new technology, integrating the new e-business strategy into current operations, and handling new customer relationships, are all important steps in managing change.

MANAGING THE DEVELOPMENT OF AN E-BUSINESS STRATEGY

The shift from a traditional brick-and-mortar enterprise to a click-and-mortar entity typically begins with the formation of the e-business strategy itself, which is often a time consuming and labor intensive process. Many steps are involved in creating an effective business approach, and many levels of management are typically involved. The enterprise must first decide on the common goals it wishes to achieve by implementing an e-business plan. Management should decide why it is going online and what benefits the Internet can provide. It must decide if it is going to target existing customers or try to attract new ones. The enterprise also needs to select target markets and advertising methods, decide what it will be promoting online, identify competitors, and be in tune with conditions in its selected markets.

While these steps are no doubt important, managing the change that goes along with creating a new business strategy is often difficult, and even overlooked. According to a study done by Deloitte and Touche in 2000, 70 percent of online retailers surveyed did not have an e-commerce strategy. Many simply had established a Web site to test demand for their product or service on the Internet. The study did find that those who took the time to develop a strategy were outpacing their competition. According to a January 2000 E-Commerce Times article, "these e-tail leaders have developed a strategy that integrates their Web efforts with other channels. Their e-business effort is designed to win market share and mind share with innovative value-added service—not just to get a presence on the Web."

MANAGING STAFFING ISSUES

In order to successfully manage an e-business strategy, the enterprise must also have an employee base that is open to change. These employees must be adaptable to new technology and able to learn new skills. Major decisions management must make include deciding whether or not to use existing staff, hire new information technology (IT) employees, create new departments, or outsource e-business-related tasks. These employees, as well as the enterprise as a whole, must also learn how to interact with customers, suppliers, and colleagues, by utilizing new communication methods—Web chat or e-mail, for example—that will stem from the new e-business model.

Staffing issues can also be a major snag in implementing an e-business strategy. According the previously mentioned Deloitte and Touche study, nearly 50 percent of retailers surveyed in 2000 did not have a specified leader heading up their e-business initiatives. The study also reported that many executives believed they lacked sufficient staffing levels to support the business that the Internet could generate. Another study done by Andersen Consulting and the Economist Intelligence Unit in July 2000 also found issues concerning employee and enterprise adaptation. According to the report, e-commerce business plans were updated often, which required knowledgeable manpower. The report also predicted that by 2005, over half of e-business initiatives will have a planning life span of less than 12 months. In order to manage quickly evolving e-business development, enterprises need to have employees in place who can work effectively in a fast-paced, changing environment.

The Andersen study also found that financial executives must be will to adapt to new roles and responsibilities as e-business initiatives are set in place—these initiatives often necessitate different accounting methods than traditionally used in the past. Adopting an e-business strategy not only affects accounting executives, but other officers and executive managers as well. Those in key roles must adapt as their positions and job descriptions evolve due to the development of e-business initiatives that affect their area of expertise. Advertising and marketing executives, IT executives, and other key players must manage change effectively in order to keep the strategy in place.

MANAGING INTEGRATION AND NEW CUSTOMER RELATIONSHIPS

An effectively integrated e-business plan has the potential to increase profits, secure a competitive position in a market, and help establish strong relationships with customers. Integrating the e-business plan into existing operations, however, can be a major task. Along with traditional business operations, management is faced with setting financial budgets and allocating resources for e-business initiatives. The enterprise must also manage the increased business generated by entering the world of e-commerce and make sure staffing and systems levels are adequate to ensure quality customer service. Communication across departments is also crucial and management needs to be able to measure success and return on investment (ROI) in its e-business initiatives.

Providing high levels of customer service is also key to successfully integrating an e-business strategy. As the number of shoppers on the Web continues to increase, enterprises need to offer services on their Web sites that parallel a brick-and-mortar experience. Many stores that now have purchasing capabilities on their sites allow shoppers to buy an item online and return in a physical store, if they so choose. Many offer price comparisons. Dell Computer, for example, allows a consumer to build a computer online and track the machine's assembly and shipping status. Amazon.com, recognized as a leader in Web customer service, utilizes software that analyzes customer purchases to make suggestions on music and books in which a consumer might be interested. As Web consumers continue to demand high levels of customer service, enterprises that begin to offer products and services online must have adequate staffing levels in place to manage customer relations and to ensure that these products and services are issued in a timely manner.

Three companies that have successfully managed e-commerce business initiatives are Victoria's Secret, Eddie Bauer, and Cheap Tickets. Victoria's Secret, its online venture operating as a separate business entity, has integrated its catalog, Web site, and retail outlets effectively and has recorded profits from its initiatives. In 1999, the firm used the Internet to promote its fashion show, which was broadcast to over 10 million Web surfers by way of streaming video. By using cutting-edge marketing as well as integrating product data, inventory, and demographics of online shoppers, Victoria's Secret has increased customer transactions on its Web site. Eddie Bauer launched its Web site in 1996, and has also succeeded in recording a profit for its online ventures by integrating customer and inventory information. As a March 2001 E-Commerce Times article stated, "in order for e-tailers to thrive in the new e-commerce environment, companies must integrate their customer and inventory information across all channels and view every customer interaction as an opportunity to learn." Eddie Bauer has been successful with this integration by utilizing software that captures crucial customer information such as size and preference. The software then searches the inventory to come up with purchase suggestions tailored to customer as they shop online. Cheap Tickets, a travel ticket firm, has also managed its e-commerce ventures well. According to the company, its Internet bookings, which grew by 78 percent in 2000, accounted for more gross booking than any of its other distribution methods. Its Internet business was expected to continue to grow faster than any of its other divisions.

While many companies successfully integrate their e-business initiatives, there are enterprises that do falter. Toys 'R' Us Inc., for example, suffered many problems during the 1999 holiday season and was unable to deliver its products in time for Christmas. Many of the toy retailer's online customers were left scrambling to find substitute gifts at the last minute. At the time, the firm was utilizing its traditional distribution channel for its online sales and found itself ill-prepared to handle an unexpected spike online ordering. A class action law suit eventually brought against the firm alleged that Toys 'R' Us deceived its customers by stating it could deliver products on time when it knew this task was impossible. Toysrus.com also came under fire when claims surfaced that it was selling customers' private information to marketing firms.

The company did, however, facilitate a turnaround for the 2000 holiday season. It revamped its distribution methods and partnered with Amazon.com. Under the terms of the ten-year deal, Toys 'R' Us was able to utilize Amazon's experience in e-business by operating its Web site under the Amazon.com platform. Sales increased dramatically. In fact, the company secured holiday revenues of $124 million, a 218 percent increase over the previous year.

Most enterprises realize the importance of not only having a presence on the Web, but also of having an effective business plan that supports its e-business initiatives. Operating a company Web site that enables consumers to find information on products and services, as well as purchase those items, can be beneficial on many levels. A sound e-business strategy has the potential to increase sales, reach markets that traditional brick-and-mortar platforms are unable to access, and reduce operating costs. E-business can also provide an increased level of customer service and a faster exchange of information between the consumer and the enterprise. According to the Gartner Group, "enterprises that have implemented e-commerce as part of a business strategy have been more successful in reducing business cycle times, improving cash flow, reducing inventories, decreasing administrative costs, and opening new markets and distribution channels." While managing the change that goes along with ever-changing e-business initiatives can be difficult, successful management of these initiatives has the potential to pay off in the long run.

FURTHER READING:

E-Business Systems Integration Center. "E-Business Strategy." Falls Church, VA: E-Business Systems Integration Center, 2000. Available from www.sic.nvgc.vt.edu/Thompson.

Enos, Lori. "Study: CFOs Not Ready for E-Commerce." E-Commerce Times. July 26, 2000. Available from www.ecommercetimes.com.

Hof, Robert D. "What Every CEO Needs to Know About Electronic Business." BusinessWeek Online. March 10, 1999. Available from www.businessweek.com/1999.

Intel Corp. "E-Business Going Forward." Santa Clara, CA: Intel Corp., 2001. Available from www.intel.com/eBusiness/products.

Mahoney, Michael. "Special Study: Look Who's Making Money Online, Part II." E-Commerce Times. March 29, 2001. Available from www.ecommercetimes.com.

Speigel, Robert. "Report: 70 Percent of Retailers Lack E-Commerce Strategy." E-Commerce Times. January 26, 2000. Available from www.ecommercetimes.com.

Weisman, Jon. "Toysrus.com Rebounds After 1999 Stumble." E-Commerce Times. January 5 2001. Available from www.ecommercetimes.com

SEE ALSO: Shakeout, Dot-com; Integration

Managing Organizational Change

Organizational change occurs when a company makes a transition from its current state to some desired future state. Managing organizational change is the process of planning and implementing change in organizations in such a way as to minimize employee resistance and cost to the organization while simultaneously maximizing the effectiveness of the change effort.

Today's business environment requires companies to undergo changes almost constantly if they are to remain competitive. Factors such as globalization of markets and rapidly evolving technology force businesses to respond in order to survive. Such changes may be relatively minor—as in the case of installing a new software program—or quite major—as in the case of refocusing an overall marketing strategy, fighting off a hostile takeover, or transforming a company in the face of persistent foreign competition.

Organizational change initiatives often arise out of problems faced by a company. In some cases, however, companies change under the impetus of enlightened leaders who first recognize and then exploit new potentials dormant in the organization or its circumstances. Some observers, more soberly, label this a "performance gap" which able management is inspired to close.

But organizational change is also resisted and—in the opinion of its promoters—fails. The failure may be due to the manner in which change has been visualized, announced, and implemented or because internal resistance to it builds. Employees, in other words, sabotage those changes they view as antithetical to their own interests.

AREAS OF ORGANIZATIONAL CHANGE

Students of organizational change identify areas of change in order to analyze them. Daniel Wischnevsky and Fariborz Daman, for example, writing in Journal of Managerial Issues, single out strategy, structure, and organizational power. Others add technology or the corporate population ("people"). All of these areas, of course, are related; companies often must institute changes in all areas when they attempt to make changes in one. The first area, strategic change, can take place on a large scale—for example, when a company shifts its resources to enter a new line of business—or on a small scale—for example, when a company makes productivity improvements in order to reduce costs. There are three basic stages for a company making a strategic change: 1) realizing that the current strategy is no longer suitable for the company's situation; 2) establishing a vision for the company's future direction; and 3) implementing the change and setting up new systems to support it.

Technological changes are often introduced as components of larger strategic changes, although they sometimes take place on their own. An important aspect of changing technology is determining who in the organization will be threatened by the change. To be successful, a technology change must be incorporated into the company's overall systems, and a management structure must be created to support it. Structural changes can also occur due to strategic changes—as in the case where a company decides to acquire another business and must integrate it—as well as due to operational changes or changes in managerial style. For example, a company that wished to implement more participative decision making might need to change its hierarchical structure.

People changes can become necessary due to other changes, or sometimes companies simply seek to change workers' attitudes and behaviors in order to increase their effectiveness or to stimulate individual or team creative-ness. Almost always people changes are the most difficult and important part of the overall change process. The science of organization development was created to deal with changing people on the job through techniques such as education and training, team building, and career planning.

RESISTANCE TO CHANGE

A manager trying to implement a change, no matter how small, should expect to encounter some resistance from within the organization. Resistance to change is normal; people cling to habits and to the status quo. To be sure, managerial actions can minimize or arouse resistance. People must be motivated to shake off old habits. This must take place in stages rather than abruptly so that "managed change" takes on the character of "natural change." In addition to normal inertia, organization change introduces anxieties about the future. If the future after the change comes to be perceived positively, resistance will be less.

Education and communication are therefore key ingredients in minimizing negative reactions. Employees can be informed about both the nature of the change and the logic behind it before it takes place through reports, memos, group presentations, or individual discussions. Another important component of overcoming resistance is inviting employee participation and involvement in both the design and implementation phases of the change effort. Organized forms of facilitation and support can be deployed. Managers can ensure that employees will have the resources to bring the change about; managers can make themselves available to provide explanations and to minimize stress arising in many scores of situations.

Some companies manage to overcome resistance to change through negotiation and rewards. They offer employees concrete incentives to ensure their cooperation. Other companies resort to manipulation, or using subtle tactics such as giving a resistance leader a prominent position in the change effort. A final option is coercion, which involves punishing people who resist or using force to ensure their cooperation. Although this method can be useful when speed is of the essence, it can have lingering negative effects on the company. Of course, no method is appropriate to every situation, and a number of different methods may be combined as needed.

TECHNIQUES FOR MANAGING CHANGE EFFECTIVELY

Managing change effectively requires moving the organization from its current state to a future desired state at minimal cost to the organization. Key steps in that process are:

1. Understanding the current state of the organization. This involves identifying problems the company faces, assigning a level of importance to each one, and assessing the kinds of changes needed to solve the problems.
2. Competently envisioning and laying out the desired future state of the organization. This involves picturing the ideal situation for the company after the change is implemented, conveying this vision clearly to everyone involved in the change effort, and designing a means of transition to the new state. An important part of the transition should be maintaining some sort of stability; some things—such as the company's overall mission or key personnel—should remain constant in the midst of turmoil to help reduce people's anxiety.
3. Implementing the change in an orderly manner. This involves managing the transition effectively. It might be helpful to draw up a plan, allocate resources, and appoint a key person to take charge of the change process. The company's leaders should try to generate enthusiasm for the change by sharing their goals and vision and acting as role models. In some cases, it may be useful to try for small victories first in order to pave the way for later successes.

Change is natural, of course. Proactive management of change to optimize future adaptability is invariably a more creative way of dealing with the dynamisms of industrial transformation than letting them happen willy-nilly. That process will succeed better with the help of the the company's human resources than without.

see also Organizational Growth

BIBLIOGRAPHY

Gilley, Ann. The Manager as Change Leader. Praeger, 2005.

"The Industry Isn't Changing. It Has Changed!" Beef. 13 March 2006.

Lawler III, Edward E. and Christopher G. Worley. "Winning Support for Organizational Change: Designing employee reward system that keep on working." Ivey Business Journal Online. March-April 2006.

Murray, Art and Kent Greenes. "The Enterprise of the Future." KMWorld. March 2006.

Schneider, Dan. "It's a Leader's Duty to Manage Change." Business Record (Des Moines). 20 February 2006.

Schraeder, Mike, Paul M. Swamidass, and Rodger Morrison. "Employee Involvement, Attitudes and Reactions to Technology Changes." Journal of Leadership & Organizational Studies. Spring 2006.

Wallington, Patricia M. "Making Change." CIO. 1 April 2000.

Wischenvsky, J. Daniel and Fariborz Damanpour. "Organizational Transformation and Performance: An examination of three perspectives." Journal of Managerial Issues. Spring 2006.

                              Hillstrom, Northern Lights

                                updated by Magee, ECDI