[8] 2002 e-business-strategies-for-virtual-organizations

e-Business Strategies for Virtual Organizations
are, and they are industry specific and not yet fully apparent.
For example, it will become apparent that e-business enables
and requires new product capabilities and new services. This
opens opportunities for those already in business, but equally
opens the way for new entrants. The positions of current players
are threatened, especially those who act as intermediaries.
As a result we see a trend for e-business to bring producers
closer to the consumer, leading to the reduced need for
intermediaries (wholesalers, distributors and the like). This
trend toward disintermediation has been observed in the
financial markets and is being followed by developments in the
insurance and travel industry. Does this mean less employment?
Probably not, but it does imply that different forms of
employment will prevail.
On the other hand, we may also observe the opposite trend in
action at the same time. There is a process of reintermediation
occurring as e-business creates the possibility of new and
different forms of intermediary – the bookseller Amazon.com
being the world’s largest and best known example. These very
different opportunities and threats cannot be evaluated through
simple cost – benefit analysis tools and present a significant
challenge for investment and risk analysis.
8.4 Return on investment and risk analysis
172
Some EC initiatives could be strong revenue generators but
may not create new markets; others may create new markets
but will not return a significant profit. Some may create a
competitive advantage in the short term but lose this on the
emergence of a new competitive initiative in e-business.
Resources required to create additional value through
e-business need to be examined with respect to their likely
return on investment in order to develop a compelling business
case. This is not so simple as it sounds, however.
Traditional measures such as discounted cash flow (DCF) and
net present value (NPV) do not take into account the values of
benefits such as knowledge of customer needs. Calculating any
rate of return on investment (ROI) from e-business cases
requires an assessment of increased revenue as well as
decreased costs; customer value variables, stakeholder value
variables and competitive capability variables. One approach
suggested by Parker (1996) and referred to as information
economics attempts to address some of these issues by classifying
values and risks as (a) values: financial, strategic and