E-business focus inadequate: KPMG survey

Key executives expressed that senior management's focus on e-commerce was lacking and suggested dedicating a senior-level manager with sole responsibility for e-business initiatives.
Written by ZDNet Staff, Contributor

Key executives expressed that senior management's focus on e-commerce was lacking and suggested dedicating a senior-level manager with sole responsibility for e-business initiatives.

NEW YORK - The majority of companies in a KPMG International global study see the Internet having a profound effect on the role they play in their industries - with nearly one-third expecting to see e-business changing their core businesses, according to the professional services organization.

Some 30 percent of 331 senior corporate executives interviewed say that e-business will change the definition of their core business, with a greater percentage of executives in electronics (43 percent), financial services (42 percent) and communications (39 percent) industries saying so.

These findings are reported in the KPMG study: "The e-business value chain: Winning strategies in seven global industries," which was conducted by the Economist Intelligence Unit in cooperation with KPMG in June and July 2000. The study focuses on the automotive/manufacturing, chemicals, communications, consumer markets, electronics, financial services, and pharmaceuticals industries.

"The revolution triggered by the rise in the Internet and e-business is clearly gaining momentum and influence, despite the recent fallout suffered by the dot-coms," said Alistair Johnston, KPMG International Managing Partner, Global Markets.

"On the positive side, the changes will deliver new opportunities, from strengthened customer relationships to new sources of revenue. However, the dramatic changes occurring across these industries are posing a real threat of diminishing market share for those companies who may be unable to adapt quickly."

Most companies were found to have an e-business strategy and active involvement by senior management in formulating e-business strategies. However, the KPMG analysis also disclosed that senior management involvement is probably inadequate at more than 40 percent of the companies surveyed - suggesting that it may take longer for those companies to implement their e-business plans.

When asked 'what changes to your organizational structure are needed for your e-business strategy to succeed,' more than half of the executives overall responded that their firms need to dedicate a senior-level manager with sole responsibility for e-business initiatives. E-business strategy is being driven by executive committees at 42 percent of the firms, and by chief executives at 28 percent.

Among the seven industries included in the study, the automotive industry ranked lowest (35 percent) in senior management involvement.

Not surprisingly, electronics (80 percent) and financial services (62 percent), two industries at the leading edge of e-business change, enjoy the highest degree of senior management participation.

The survey found the financial services and communications industries undergoing fairly significant e-business change, with the chemical and automotive industries lagging in terms of readiness for e-business growth. The analysis is based on a number of measures, including senior management commitment, web site capabilities, and on-line revenue projections.

Key Findings

  • 50 percent of the survey respondents expect e-business to change their company's relationship to other industries, in effect, crossing industry lines to offer bundled products and services
  • 57 percent expect e-business to transform the role they play within their industries
  • All of the industries surveyed are placing more emphasis on B2B than B2C, and expect to shift the balance of their investments toward B2B initiatives. In addition, 48 percent believe that online exchanges will be very important for their own supply chains in the next 18 months, up from 19 percent today.
  • 45 percent said their companies are investing in dotcoms. The reasons for doing so are to gain access to e-business expertise and to reach new customers and markets.

High Expectations
In the next year and a half, the executives surveyed expect dramatic improvement in the web or internet-based features that they offer suppliers and partners. Today, only 11 percent of those interviewed report that their suppliers can access their inventory systems.

In 18 months, 46 percent say their firms will grant access. Electronic bill payment capabilities to suppliers are expected to increase to 44 percent in the next 18 months, up from 12 percent.

Projections for on-line sales growth, the study found, are significant. Respondents expect their e-business revenue contribution to increase from an average of seven percent today to 22 percent in 18 months.

While communications and financial services firms today enjoy the greatest percentage of online sales, the largest growth will come from the electronics industry, which is projected to increase from 9 percent today to 33 percent in 18 months.

Other KPMG/EIU findings

  • E-business strategies are being adopted because of the need to keep future strategy options open (75 percent), need for growth opportunities (73 percent), for internal efficiencies (55 percent) and because of competitive pressures (53 percent). By contrast, little direct pressure is coming from either their boards (19 percent) or shareholders (17 percent).
  • When asked about the potential barriers to e-business implementation, executives interviewed in the study cited the necessity to re-engineer business processes, the lack of e-business skills, and the lack of back and front-end systems integration.
  • In pursuing e-business goals, the executives said their firms would be less willing to risk alienating customers (13 percent) or a lower short-term share price (16 percent), but would be more willing to risk lower short-term revenues (23 percent), disruptions with established supplier relationships (22 percent) or cannibalizing existing sources of revenue (22 percent).

For the "The e-business value chain: Winning strategies in seven global industries" study, 331 industry executives were surveyed in June and July in North America, Europe and Asia.

In addition, 42 senior executives participated in in-depth interviews during the same timeframe. The hypotheses for the study were developed jointly by the Economist Intelligence Unit and KPMG.

KPMG's global industry strategy focuses on a number of priority sectors, including financial services; industrial markets; consumer markets; information, communications & entertainment; and infrastructure, government and healthcare. KPMG is the global network of professional service firms whose aim is to turn understanding of information, industries and business trends into value. With more than 100,000 people worldwide, KPMG member firms provide assurance, tax and legal, financial advisory and consulting services from more than 830 cities in 159 countries.

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