Management consulting
16.4 Dot.com organizations
In comparison with bricks-and-mortar organizations, the dot.coms are generally characterized by higher speed of development, fewer organizational resources, and more openness to outsourcing many parts of their business processes. They also have additional requirements, such as start-up funding, not normally needed by bricks-and-mortar organizations. What is similar is the need for ERP connections in B2B, and excellence in Web design and in B2C propositions.
Funding
Many dot.coms seek consulting advice in relation to creating a business plan and raising finance. Many large consultancies offer this type of service, including various types of incubators and accelerators. Incubators and accelerators help entrepreneurs who have a good idea, but lack the staff and/or expertise to take the business through the pre-operations stages. The incubators usually offer a network of contacts and sources of finance, in addition to expertise in building Web sites. The work is sometimes performed on a “no success, no fee” basis and payment in equity or equity options (see section 30.4) can sometimes be negotiated.
Independent consultants and non-executive directors are often used by dot.coms. Here the focus is on expertise in a specific market sector, a network of contacts, and experience of building entrepreneurial businesses. Many successful entrepreneurs use the money they have made and their expertise by investing in and advising new start-ups.
There are of course the traditional corporate finance advisers who provide advice on the process of raising finance and structure deals. Integral to corporate finance advice is legal and tax advice. There are many firms that specialize in funding negotiations and advice on corporate structure.
IT platform and infrastructure
The traditional providers of technology consulting are obvious players in this arena; however, much of the success of pure-play Internet consultancies comes from winning contracts to build the Web sites for dot.coms. Since a dot.com could start with a clean sheet of paper, there are no legacy ERP systems to integrate, so they use Internet-only technology from the beginning. The outsourcing of much of the deployment of IT infrastructure, running of systems, and possibly development comes quite naturally if the existing IT infrastructure does not need to be changed. Financial resources are often not sufficient to make investments in hardware and software or to build the expertise to run the systems. Another reason for outsourcing the IT infrastructure is the need to scale the business fast, hence adding capacity on a flexible basis is important. Vendor-based financing of IT equipment is relatively common, with the caveat that it is risky to finance start-ups.
Dot.coms often use a wide range of independent consultants and contractors when building their online business. Contacts and personal referrals create a
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tightly knit network of expertise that can be drawn on when needed. This has led to the development of a new breed of consultants, sometimes called “virtual networked consultants”. There is a main contact who assembles a team for a specific project, while at the same time subcontracting part of his or her time on another project. Many of these consultants have major consulting firm experience but value personal freedom and the possibility of avoiding the administrative burden of being part of a large organization.
These virtual consultants make use of the power of the Internet with Webbased project management, discussion rooms and electronic methods of keeping track of the progress of projects. The growth of virtual consultancies is likely to continue, with diversification of the consulting market to meet the need for specialist skills and a flexible approach.
Financial management
This is a typical function where dot.coms use external resources in the early development of the business. The provider of finance is likely to request that an experienced finance director is part of the management team; however, the administrative process is often outsourced to an accounting firm or independent contractors who are used as skilled resources paid on a time basis, rather than building an in-house capability. With the development of the business it is likely that an ASP solution will be preferred more often by a dot.com than a bricks- and-mortar company. Again, this view is driven by the fact that the dot.com can build the finance function from scratch.
Marketing
In the early development of e-commerce the dot.com often relied on the Internet as the prime marketing channel. Advertising and click-through affiliate marketing were important sources of revenue. By early 2001, signs of change in the marketing mix and channel strategy among the dot.coms started to emerge. For instance, Internet banks are establishing high-street banking outlets and Amazon.com is building warehouses in new locations. As a consequence, traditional skills and expertise in multichannel marketing in a variety of media are increasingly sought after. Advertising agencies that have built up expertise in Web design are likely to be valued more for their traditional marketing skills than their Web design expertise in the future.
HR function
One of the biggest challenges for a fast-growing dot.com is recruiting, developing and retaining highly skilled staff. The early dot.coms relied heavily on the attraction of share options rather than well-thought-through HR policies and systems. With the general fall in dot.coms share prices, HR issues, recruitment and organizational design are of increasing importance in attracting talent
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and retaining expertise. The need for consulting advice and support in this functional area is growing.
16.5 Internet research
A consulting area that has grown very rapidly is market analysis and technological and business forecasting concerning the future of the Internet. Firms addressing these issues combine analysis of technology development, the actual usage of the Internet and the predicted future business implications. Internet research firms employ large numbers of business analysts specializing in either market sectors or technology fields, and offer off-the-shelf reports as well as tailored assignments. Typical offerings include:
●Internet usage trend analysis
●market size estimates
●technology trends
●technology assessment.
The boundaries between traditional consulting firms and market research firms are becoming blurred and many Internet research firms are hiring business consultants to sell advice using the results of their research, or to do contract research for particular clients. Consulting firms in turn are buying Internet research firms to gain access to knowledge and skilled staff.
Another sector that traditionally has a strong emphasis on market research is investment banking. The research departments of investment banks are skilled in analysing market sectors for their equity sales teams who are advising investors to sell, hold or buy a particular stock or invest in particular sectors. Although not yet competing with management consultancies, they certainly hire specialist consultants to deepen their knowledge of the e-business aspects of market sector analysis.
The addresses of selected firms, institutions and Web sites involved in Internet and e-business-related research and information services are in Appendix 3. Some Internet-based resources are free, while some require registration or subscription. The challenge for any observer or consultant in the e-business field is to keep abreast of developments. A key step is to establish a well-developed but focused set of resources that provide regular updates and prompts when new and relevant information is available. New technology, such as context-sensitive search and artificial intelligence, is emerging, but for a while yet, searching, reading and searching again will be the order of the day. In addition to the sources listed in the appendix, many large consulting and IT firms are also important providers of information.
1See also M. E. Porter: “Strategy and the Internet”, in Harvard Business Review, Mar. 2001, pp. 63–78.
2The survey e-research@ashridge by Helen Wildsmith, completed in Jan. 2001.
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