Emergence Of The Digital Firm

Emergence Of The Digital FirmIntroductionThe first find oneself of any applied science used in a calling is that automation employ to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.-Bill Gates (http//www.saidwhat.co.uk/topicquote/ applied science)Over the past two decades Technology has come to become an inseparable part of crease activities. The groundbreaking era of dynamic and discontinuous intensify requires continual reassessment of arrangemental routines to ensure that purpose-making processes, keep pace with the dynamically changing line of descent environment. The adoption of mod technology, to maintain a digitally enhanced potent, is necessary, especially for small and medium coatd companies, to ensure their viability in the future. With the onset of globalization, the wide presence of digitally equipt familys has intensified international competition, and digi tal capabilities also provide small and medium sized enterprises with impertinently potential for participation in the international market. Inevitably, a morphological convert is brought about by all the technological equipment in the companies as the call for for new skills be created, which are accompanied by the constant need for training and training sharing, and assessment of technological issues by the counsel.Emergence of the Digital FirmThe first use of data systems in enterprises was in the form of posting watch on machines which were used in the accounting departments and focused on historical discipline reporting. The early 1960s, marked the onset of mainframe computers, which when compared to to geezerhood desk top computers and PDAs, were miniscule, in processing power. In the coming decades, the advancements in technology gained speed with management reporting, exertion processing, decision clog and forecasting enabled by instruction technology. The pr esence of Information technology is now widely significant in every blood line activity of the modern enterprise. Most recently, information systems transcended departmental, divisional and organizational boundaries in order to unify the firm electronically, often instantaneously, to its customers, suppliers, and distribution partners .(Ives, 2002)With the development of technology and mesh, modern enterprises gather in embraced Information and communication technology (ICT) and several e- ancestry applications that defend provided many an(prenominal) benefits across many intra- and inter-firm business processes and transactions. With the use of ICT applications, information and knowledge management inside the firm has considerably improved reducing transaction costs and increasing the speed and reliableness of transactions for both B2B (business-to-business) and B2C (business-to-consumer) transactions. They have also proved to be effective tools for improving out-of-door co mmunications and quality of services for established and new customers. (http//www.oecd.org/dataoecd/6/9/31919255.pdf)Most small and medium sized enterprises use information and communication technologies. Research has shown that the use mainly of computers serves administrative and functional uses, much(prenominal) as the make of accounts, payroll, the drawing up of a budget, inventory, and other similar functions (Bridge and Peel 1999). The basic condition that arises for the use of computers, but also for all technologies, old or new, electronic or not, is not only their acquisition by the SMEs, but also their correct and functional use (El Louadi, 1998).There are a large enumerate of different ICTs, which makes identifying them and their functions difficult. Below is a classification of Information and communication technologies which includes the ICTs used by enterprises and comprises of five main categories, within which the technologies-systems comprising the category are distributed individually.Classification of ICTS(Source Papastathopoulos, Beneki (2009))Intranet Intranets are inexpensive, scalable to expand or contract as needs change, and accessible from most computing platforms. Whereas most large companies must support a payoff of computer platforms that cannot communicate with each other, intranets help to provide instant connectivity, wholeing all computers into a single, seamless, network system.Electronic Commerce Although most commercial transactions still takes place through conventional grooves, rising number of consumers and businesses are using the Internet for electronic commerceBuyerRetailerInformationOrders proceeds and supportManufacturers, Suppliers and DistributorsPurchasesBidsBanks-Credit checks-Payment authorization-Electronic payment transferIllustration Electronic Commerce Information FlowsBusiness environmentThe modern business environment is characterized by a dynamic continuous change. For the firms to thrive and benefi t from ICTs, a healthy business environment is necessary. This includes a transparent, open and competitive business framework, clear independent ruler of jurisprudence for all firms, easy set up and dissolution of businesses, transparent, simple and accessible corporate regulation, and equal and stable ratified treatment for national and cross-border transactions. (http//www.oecd.org/dataoecd/6/9/31919255.pdf) organizational FormsThe concept of organizational forms was quickly accepted and vouched for by management scholars who have already accepted concepts such as the knowledge thrift or the new information economy ( Halal 1998) and who had believed that the emergence of the Internet would change the way business transactions business functions are performed (Tapscott , 1999). slipperiness to new formsAccording to Drucker (1997), businesses of the new age have not only led to advancements in technology and provided an atmosphere of stiff competition, but have also contributed to the promotion of change in the organizational forms. This is why, New Organizational Forms that respond to the need to align strategy-structure- direction processes are influenced by the dynamic changes in the environment. New transaction management modes from new organizational forms.The following illustration gives a clear picture of the increase in the use of new organizational forms, where meshwork and e-commerce make fors a significant role. (Illustration sourced from http//www.labs-associados.org/docs/OCDE_TIC.PDF)Increase in the use of new organizational formsWith every passing year, more and more firms are adopting new organizational forms in an get down to stay competitive in the market. The benefits of incorporating ICTs and other e-business activities are now widely know. In the research conducted by Christina Beneki on Organizational forms based on information and communication technology adoption (http//www.aabri.com/manuscripts/09362.pdf), an empirical call f or was carried out among 54 Greek SMEs to identify the emerging forms of organizations based on ICTs.Personal interviews were conducted with people recognized as being the most knowledgeable about the developments of ICTs within the firm. Hence, the interviewees ranged from director or owner-manager and IT personnel to general managers. The results of this study reveal that the SMEs journey towards ICT adoption-use can be classified into three aimsLevel 1 Basic Use of ICT or ICT-beginners SMEs. On this level the ICTs used by SMEs support the monitoring of basic-elementary activities, transactions and communications of the enterpriseLevel 2 Advanced Use of ICT or ICT-based SMEs. On the second level the ICTs used by the SMEs serve specialized activities of the modern enterprise, such as programming operations, transaction monitoring, and decision making and auditing. Furthermore, they combine data and advanced analytical models or data analysis tools so as to support the making of se mi structured decisions or unstructured decisions. Finally, they allow business and commercial digital transactions as well as the transmission of information with electronic means even to geographically remote places.Level 3 Superior use of ICT or ICT-Driven SMEs. The ICTs used by the SMEs on the third level contribute to the integration of the informational and business processes of the enterprise, and they support the long-term planning activities as well as the digital exchange of information, the carrying out of commercial transactions and collaborations with the external environment of the enterpriseFigure The Three Levels of ICT-Adoption ProcessThe figure shows that a very small persona of SMEs use basic ICTs (7%), about 22% percentage use ICTs serving specialized business activities, while for most of the SMEs (70%), technology does not constitute the basis but rather as a devolve to their business activities. This clearly demonstrates the steep rise in the use of Internet communication technologies.Opportunities for the management in a digitally enabled firmNew organizational forms comprising of Information and communication technology (ICT) and e-business applications provide many benefits across a wide range of business processes and transactions. (http//www.oecd.org/dataoecd/6/9/31919255.pdf)With the use of computer terminals, e-mail, internet and its applications, several types of businesses can improve information and knowledge management within the firm, leading to more efficient business processes and better firm performance.Transfer of information through shared electronic files and networked computers significantly improves the efficiency of business process like documentation, data processing and other functions like organizing incoming orders and preparing invoices.Business-to-Business and Business-to-Consumer transactions are now conducted with increased speed and reliability, using ICT applications.Sophisticated ICT applications like De cision Support System (DSS) helps firms to analyse large amounts of data in quick time, enable swift decision making. Enterprise Resource Planning (ERP) helps to integrate various departments of a firm effectively.Internet and e-commerce have forcefulally reduced the cost of business transactions.Internet-based B2B interaction and real-time communication help to reduce information asymmetries amongst buyers and suppliers and build close relationships among trading partners. (Moodley, 2002)ICT applications also increase labour productivity and have a positive impact on firm performance. The following illustration helps to identify the positive effect of ICT applications in Canada.Sourced from (http//www.labs-associados.org/docs/OCDE_TIC.PDF)Challenges faced by the management and organization in a digital firmRequirement of internal ICT and managerial knowledgeSince SMEs focus on day to day operations, they are less assured of the benefits of new technologies and would tend to lac k the human technological resources needed for a digital firm, when they decide to investment in advanced technologies. Even when they are alive(predicate) of the potential benefits of adopting e-commerce, they would need qualified personnel to carry out the operations. The firms that adopt Internet and e-commerce are likely to have personnel within the firm who have a reasonable knowledge of the incorporated technology. A study of small ICT companies with 3-80 employees suggests that the Internet was adopted by firms with personnel who understand the technology used (Mehrtens, 2001). The study found that these were not necessarily ICT professionals, but simply people interested in technology. If firms have the resources to access or outsource skills, then scarcity of technologically skilled personnel would not be a hindrance. However, presence of internal technological capabilities is still vital because adoption of internet communication technologies cannot succeed without an ap prehensiveness of the e-business model. Without internal technological capabilities, dependence on outside support services for system maintenance can be dangerous because firms that conduct e-business activities have to bear the risk of occasional system liveures and computer viruses. If ICT support services, especially in an emergency, are needed to minimise the loss from a system malfunction, the e-business system of the firm may be vulnerable if they are not immediately available. The existence of local ICT services is thus an important consideration for the management, especially for small offices in remote areas or emerging economies, where ICT services are scarce and expensive.Skills and understanding of e-business models is also vital for the managers. Successful integration of e-business requires many firms to restructure their business processes, to change organisational structures and to redefine their core competence and positions in the value mountain ranges. So, e-bu siness tools cannot be successfully introduced and implemented without the visionary power and strategic decisions about how to apply ICT technologies for business processes. (http//www.aabri.com/manuscripts/09362.pdf) price of developing and maintaining e-business systems For small and medium sized firms, sometimes, the cost of adopting e-business systems and their maintenance outweighs the benefits received from them. Budget constraints and uncertainty of return on investment may sway the managements decision to adopt e-business systems. Thus, gathering the capital for investing in sophisticated and expensive internet communication technologies is an issue that the management needs to counter. The management needs to decide, depending upon its size and capacity to bear the cost, how far they can extend their arms over the latest technologically advanced business systems. Some small businesses, especially micro-enterprises with 1-9 employees or the self-employed, may adopt a simple Web site without any e-commerce function if the cost of basic Internet use is well within their marketing budget. (http//www.aabri.com/manuscripts/09362.pdf)Viability of Business ModelsThe advancements in internet have changed the business models in a number of key industries including media, financial services, travel and automobile retailing. But although internet technology provides great prospects, not all Internet business models have been successful. Conducting business over the internet is not evermore cost effective and efficient. For some companies, resorting to conventional methods is more viable. Of course, retailers on the internet may not need to pay for attractive outlets and employees, but they would need to use a large proportion of their budget for web site maintenance, customer service call centres, supply chain management and customer acquisition. There are also challenges to be faced for firms that decide to use the web for supplementing or enhancing traditi onal business models. Businesses that are unclear about their e-business strategy may end up wasting a weed of money in building and maintaining websites that fail to deliver results. Successful websites may also incur high costs. For instance, Equipment Inc., popular seller of indoor gear, has large payroll expenditures to pay for skilled technical staff supporting the website and additional shipping expenses to ensure web orders are delivered on time.Thus, the management needs to consider the viability of e-business models for its firm before deciding to invest.Business Process Change RequirementsEven if a firm does have a viable business model, it can still fail due to bad management or poor execution of the business model. Many dot-com firms like Garden.com, Productopia.com, Pets.com, Chinese Books Cyberstore and so forth have closed down. The carrying into action and working of an electronic business model requires successful management of a firms divisions, production sites, sales offices and also maintaining close relationships with customers, suppliers and business partners. All important business processes need to be restructured and closely integrated. Firms will need to have well designed policies and procedures for sharing data. There are also traditional boundaries existing between a firms divisions and departments, customers and suppliers which can be barriers to collaboration and relationship building. Thus, the management needs to ensure a complete transformation of the firm and the ways in which it conducts business. argumentation Conflicts A channel conflict is a competition between two or more different distribution chains used to sell products or services of the same political party. ( Laudon Laudon, 2006)When a company uses the web for selling its products, it creates a channel conflict with the firms traditional methods of selling. This is especially true for products that are less information sensitive and require a physical intermed iary. In such a case, a companys revenues may drop as customer make purchases directly from the web. argument conflict is a study issue for business-to-business business models, where the consumer purchases directly from the manufacturer through the Web. Milacron Inc., a machine tools company with extensive websites, minimizes the veto impact of channel conflict by paying full commissions to reps making online sales in their territories, even if they do not work on the sale or find the buyer. Other companies have devised solutions, such as offering only a portion of their product line on the web.Legal UncertainitiesConflicting regulatory environments and legal uncertainties for cross-border transactions, especially B2C, may affect small and medium scale firms. There is no harmonised legal framework with rules pertaining to the determination of jurisdiction and applicable law nor are there mechanisms that ensure the cross-border enforcement of legal rulings. The internet is globa l and is used by numerous organizations in different countries. Suppose a product were offered on sale in China, but the purchaser lived in the United States, whose law would apply? (Laudon Laudon, 2006)Small businesses can risk being due to inconsistent laws.Trust, Security and privacyFor e-commerce to flourish there needs to be an atmosphere of trust among buyers, sellers and other partners multiform in the transactions. Consumers will be wary of the security and confidentiality of credit peak details and other personal information supplied over the internet. Internet based systems are at a risk of being penetrated by outsiders, as the internet is open to everyone. Any information, including e-mail passes through many different systems before it reaches its destination. It can be monitored and hacked into at any of these points resulting in loss of confidential data. blue-chip data such as sales contracts, marketing plans, product development and pricing strategies, etc. can be intercepted causing significant risk to the company. Thus, the management needs to be extremely cautious and maintain stringent security systems to safeguard their business models. (Laudon Laudon)Opportunities and Challenges for Employees in a digital firmThe rapid shift in trends in the market is seeing more and more companies undertaking a full scale adoption of technology that has in turn created an coordinate of opportunities for the employees. Some of them areBetter job prospects.The emergence of digital firms has opened up attractive avenues for IT employees all over the world. With advancements in every area springing up, those equip with specific technological expertise are also gaining demand with attractive bonuses rewarded.According to the research methodology used by Ricardo Parez Garrido on New Organizational Forms for knowledge transfer (http//latienda.ie.edu/working_papers_economia/WP05-03.pdf), the company alpha was founded with the idea of uniting the best pro grammers in Spain interested in the internet and e-business and create for them an environment where they could work freely. Alpha experienced a tremendous growth of 400% from 1998-1999. But the success had attracted another telecommunication giant in the country which offered better incentives for employees. As a result a majority of the Alpha taskforce moved to the competing firm.Employees empowered in decision- making.With the onset of the digital era, many firms are now approaching a change in work attitudes. The system of bureaucratic is now being replaced by independence for different roles in an organization. With more space for employees to work, an atmosphere of ownership of the company results, providing better results and incentive for staff to work.The case study on the Royal Bank of Scotland (Currie Willcocks, 1996) provides an insight into the new philosophies of work practice being adopted by the bank. Senior managers were aware that customers were intimidated by the bureaucratic image of the bank and felt a change was necessary. The traditional emphasis on geographical splits was through with(p) away with and a different structure was established with three inter-related businesses- Retail, Commercial and Corporate. This way, individual departments are given complete responsibility and independence to run their functions.Employees play a greater part in the companyThe information systems orbit is now recognized as a chief part of any firm. The days of technological expertise playing an underdog are over. It is now realized that those equipped with the technology side of the firm are better positioned to understand their part and because are now increasingly given more ownership and responsibilities.Despite the fact that modern advancements in e-business have created opportunities for employees, they have also had a negative impact on them. Some of the drawbacks areOutsourcing of technological expertise.With the wide availability of IT skill s and restructuring of organizations, most companies now prefer to outsource technical expertise which may be better suited in terms of cost and quality of technical skills. As a result the existing employees are difficult to accommodate because of the drastic changes brought about by adoption of advanced technology that renders their skills incompetent. This is especially true for companies do not primarily rely on technology for their core business functions.The case study of the Royal Bank of Scotland (RBS) and their Business Process Re-engineering project (Currie Willcocks, 1996) shows how a complete restructuring of the banks activities resulted in many job losses. Also the technology unit was perceived by the business units as a support function, not therefore core to the business. Some senior managers were keen to outsource a major portion of the technical sector altogether. This also reflects a growing trend among organization seeking IT outsourcing as an alternative to in- house operating.Obsolescence of work.Because most companies are undergoing changes in their work process by incorporating advanced information systems that help to better integrate various departments within the organization, traditional forms of work are now losing a place. more(prenominal) and more employees are now faced with job losses because their work has been rendered useless with current business systems.The case study documenting the Columbus project undertaken by RBS (Currie Willcocks, 1996) gives evidence that due to the complete restructuring of the banks activities and how banking services were offered to customers, many manager were worried about a large staff redundancy.Communication problemsInevitably, communication problems between business units and technological units will tend to occur. Since technology department supplies the applications for various business functions, sometimes friction might arise over what is supplied and what is actually needed. Due to the complexities involved in business functions, the tactics and strategies used might change from time to time, causing the technological department to swiftly adapt to the changing conditions, which is not always simple.The case study documenting restructuring of RBS (Currie Willcocks, 1996) indicates the prevalence of communication problems. Business units complain that computers have been imposed on them with little relevance to the business context. However, the technology unit argued that business users change their mind regularly as to what is required from them. This miscommunication may lead to high costs, failure to meet delivery dates, loss of management control, low morale, etc.ConclusionThe emergence of new organizational forms according to the level of use of information communication technologies gives rise to new research opportunities in the sensitive sector of SMEs. In addition, the need for the emergence of new organizational forms stems also from the fact that t echnology no longer constitutes a mere link in the chain of businesses processes but rather the driving force behind this chain both in the internal and in the external business environment.