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Introduction Organizations throughout the world are being affected by the digital economy and are
compelled to change in different ways. The objective of this paper is to propose to the
national strategy makers of overseas trade development services an integrated approach
to managing that change. The first part sets the stage by demonstrating why the digital
economy is challenging us to rethink traditional business methods. The next parts examine
how this is impacting on business and government organizations and then focusses on the
Canadian Trade Commissioner Service (CTCS). Finally, the experience and current
thinking of the CTCS is drawn upon to illustrate the changes that are required at each
operational level. I. The challenge of the new digital economy The World Wide Web has emerged as a major external force that is revolutionising the way
in which business is conducted. In much the same way that the introduction of the
telephone, and later the fax machine, profoundly and irreversibly changed our lives, the
Internet is universally transforming the economics of information and transactions. Indeed,
as people and businesses are now able to communicate electronically using the universal
technical standards of the Internet, we are moving from an era of information scarcity to
one of information abundance. This, coupled with ever decreasing costs of technology,
is opening up opportunities for the emergence of new players throughout the world to
participate in international trade.
The digitization of traditional business methods is also helping cut transaction costs and delivery times which is leading to increased productivity, faster decision-making and fewer errors. According to an analysis that compared business-to-business e-commerce in 17 different industry sectors with traditional business methods, such as the use of paper, telephones and fax machines, the estimated savings are in the range of 2% to 40%(1). Business-to-business (B2B) transactions are currently driving e-business growth which is expected to grow exponentially. For example in the United States, it is projected that B2B revenues from e-business will bring in as much as US$1.3 trillion in 2003, up more than tenfold from 1999. Although business-to-consumer (B2C) revenues are growing somewhat more modestly, they are projected to reach US$110 million in 2003(2). All these developments, engendered by the Internet and the advent of e-business, are progressively affecting everyone everywhere and are challenging us to change. New business models are emerging and organizations worldwide are having to rethink not only how they deliver products and services but also their raison d'être. II. The impact on business and government organizations 
An interesting four-stage e-business model has been developed which depicts the relationship between the role played by e-business and the degree of change of the business model of a given organization(3). When e-business plays a small part in an organization's operation, it enables, or facilitates, the way in which the entity already functions. However, when the impact of e-business is larger, the organization changes its operation, or is transformed, and new ways of doing business emerge. Most governments have been slower than the private sector in embracing e-business. The key difference between them is the question of access. Government cannot choose its customers, the services it provides must be able to reach everyone. Also, security and the ability to guarantee the integrity of information are major concerns. Nevertheless, there is increasing pressure on governments to meet the rising expectations of their clients for electronic service delivery (ESD) and reduce costs. Governments are realizing too that they are not as immune from competition as they thought and that their own e-government strategies can have a catalytic effect on business as well as be a powerful force in bridging the "digital divide" between the haves and the have-nots(4). The following reviews the model and illustrates how at each stage business and government alike are developing new ways of doing business. 1. Channel enhancement builds on the establishment of a website, which is the first step in the e-business continuum. At this stage, the Internet is increasingly used as a mechanism for interacting with customers, suppliers and partners. The focus is on improving transparency and stakeholders' access to information. • Canada's Chapters bookstores (http://www.chapters.ca) introduced on-line stores in 1998 building on the brand of their traditional stores. Customers have access, via the on-line stores, to more than 2.5 million book titles as well as over 46,000 music CD titles and over 28,000 videotape and DVD titles. • The Canadian government's department of industry created in 1996 a site called Strategis (http://www.strategis.ic.gc.ca) which offers a wealth of information to business, citizens and government partners. Every day there are, on average, 23,000 visits to this site and more than 1 million documents are viewed each week. 2. Value Chain(5) Integration happens as a result of increased interaction between buyers, suppliers, distributors and consumers. During this stage, much lower transaction costs can be achieved through economies of scale. Process specialisation will occur which may lead to the redesign or outsourcing of key processes to further improve cost-efficiency. • Cisco Systems (http://www.cisco.com), a world leader in networking for the Internet, has put their after sales support operations online saving the company over US$500 million per year(6). This new business model meant that a six-fold increase in Cisco's sales between 1994 and 1999 required only doubling the number of technical support staff. • Canada launched in 1998 a national electronic tendering service called MERX (http://www.merx.cebra.com) which consolidates public sector contracting opportunities from all levels of government on a common site. This Internet-based system allows companies to view and download, for a modest fee, bidding documents on-line as well as identify partnering opportunities. 3. Industry transformation. At this stage, the impact of e-business seriously challenges traditional working practices and new business models are introduced. New competitors emerge and existing organizations must often reinvent themselves to survive. This is when the economies of scale achieved by different partners are combined and lead to economies of scope. • Online marketplaces such as e-steel (http://www.e-steel.com) enable companies to buy and sell on their own virtual exchange thus saving on search and transaction costs. These new unregulated "hubs" concentrate much market power and are raising fears among antitrust officials that they pose a threat to competition(7). • Chemdex Corporation (http://www.chemdex.com), created in 1997, is an "infomediary(8)" providing complete e-business solutions for the life sciences industry by creating on-line shopping sites that bring buyers, sellers and partners together. • Encyclopaedia Britannica (http://www.britannica.com) was forced to change their business strategy when new competitors began selling similar digital products at a fraction of the cost. Their mission now is "to become the most entrusted source of information, knowledge and learning in digital media"(9). • Canada's federal government is committed to achieving fully enabled electronic service delivery by 2004(10). The Government On-Line Project (http://www.gol-ged.gc.ca) will include the development of a secure channel and of pilot partnership sites between different levels of government and the private sector. 4. Convergence occurs when the boundaries between and within organizations blur and is driven by combined economies of scale and scope that are required to succeed in these new electronic markets. Fewer larger players may emerge either through acquisitions or alliances. • Canada's Globe and Mail and Toronto Star remain strong competitors in the traditional area of newspaper publication but have joined forces to create workopolis.com (http://www.workopolis.com) Canada's most extensive job site on the Internet. • The government of Canada's health department will be contributing to the development of Canadian Health Network (http://www.canadian-health-network.ca/customtools/homee.html), a national Internet-based service, in partnership with 400 other organizations. The goal is to provide a single access point, or portal, for information related to health. III. The impact on the Canadian Trade Commissioner Service The Canadian Trade Commissioner Service (CTCS) is Canada's overseas trade development arm with over 500 trade officers in 133 posts around the world who provide services to Canadian companies that have researched and selected their target markets. 1. Growing number of clients
As the reach of the Internet grows and the minimum size of a company selling internationally falls, the CTCS can expect more clients, more often. Indeed, with decreasing search costs, low connectivity costs and accessibility to information on the Internet, it will be even easier for a growing number of smaller companies to request services from our trade officers at posts. Unless the CTCS is able to adapt to this change, trade officers will spend most of their time being reactive. 2. New competition
As new on-line marketplaces spread into all sorts of sectors, the CTCS can expect competition from the private sector for its information-based services. Indeed, more and more "infomediaries" are emerging whose sole purpose is to provide on-line marketplaces, or "hubs", for buyers and sellers globally to connect and transact directly with each other. Unless the CTCS is able to adapt to this change it is destined to become less relevant or compete with legitimate private sector organizations. 3. The CTCS' digital response Using the four-stage model presented above, following are some examples of how the CTCS is responding to the digital challenge: • Channel enhancement. The CTCS has established a website called InfoExport (http://www.infoexport.gc.ca) and initiated electronic service delivery (ESD). Clients can now self-serve and access from a single point sector/market reports as well as information on services and programs available to them at each post. • Value chain integration. At this stage, the CTCS must streamline its service delivery processes and digitize its service portfolio to support consistent ESD. InfoExport will be integrated with the client database and management system so that clients can receive information that is tailored to their interests. • Industry transformation. At this stage, the CTCS must avoid competing with the private sector and strive to provide on a proactive basis personalized and interactive e-service to its clients. Some examples achieved thus far are "virtual trade missions", the outsourcing of non-core services, and performance reporting via the Intranet. • Convergence. At this stage, new alliances will emerge among trade development stakeholders (i.e. other levels of government, other government departments, industry associations). InfoExport will continue to evolve as a portal(11) to the CTCS and will provide access and services to many of these new partners. IV. An integrated approach to managing change Although each national overseas trade development service is unique, what they have in common are: (1) a domestic arm or counterpart, (2) a headquarter, (3) posts, and (4) trade officers at those posts. It is understood that they will be at different stages in terms of thee-business model presented above in terms of the effect e-business is having on the inter-relationships between these four operational levels. In order to effectively manage the change required to evolve along the e-business continuum, it is necessary to adopt an integrated approach which addresses the changes that are occurring at each level.
1. New governance for Canada's trade development The CTCS is part of the Department of Foreign Affairs and International Trade. In 1998, Team Canada Inc (TCI) was created in collaboration with key partners. TCI is a network of 23 partners with a secretariat, a board of directors, an integrated plan and an annual achievements report. Within this framework the CTCS is responsible for "border out" (offshore) services while domestic partners provide "border in" services. • In an effort to provide one-stop access to information and services available from all partners, a toll-free number was set up as well as a ExportSource (http://www.exportsource.gc.ca) which enables online access to trade development information available on all partners' websites. • E-business may actually enable the Canadian government to reinforce its new governance model for trade development and combine sectoral and functional linkages without the need for "brick and mortar" restructuring. 2. New role for CTCS headquarters The role of headquarters (HQ) has shifted from providing direction to the posts to supporting the posts. This includes managing the new trade development model, marketing the services, and developing tools and systems to ensure consistency in service delivery, performance evaluation and sound resource allocation. The challenge is to streamline processes and digitize the services portfolio in order to achieve consistent ESD. • HQ conducted extensive consultations with clients and stakeholders which lead, in an effort to improve cost-efficiency, to a clear definition of which services are to be provided by whom, i.e., by the CTCS (HQ or posts), by domestic partners or jointly, and which are now outsourced to the private sector. • To support the new service model, HQ developed an Intranet site with practical guidelines, delivered training at posts, and set up a Post Support Unit and a Continuous Improvement Unit. HQ also ensures that post websites, which are accessible through the CTCS' Internet site, consistently reflect the new model. • To market the services, HQ has developed a brand image and a CTCS logo or "signature" for all its promotional materials, be they electronic or published. Promotion vehicles include kits, articles, presentations and the Internet site. 3. New organizational structure at posts Now that the services delivered at posts are clearly defined and that posts can be reached directly via the Internet, posts are having to reorganize themselves to manage their resources better to deliver services through a variety of channels. One must not underestimate the complexity of the transition to delivering fewer but more personalized services to an ever increasing stream of legitimate clients. This will take time and much effort. • The posts are ensuring that their respective websites contain as much relevant information as possible on their markets so that clients are able to self-serve. This includes sector reports, business opportunities, visitor information, local contacts and numerous valuable links. • Posts are beginning to reorganize their trade section and create an InfoCentre to handle many of the general enquiries and to develop electronic files of commonly used documents to ensure corporate knowledge is maintained. 4. New role for trade officers As trade officers at posts are increasingly expected to provide more personalized services to clients who have researched and targeted their markets, their role will evolve to one of "relationship builder and information broker". For this transition to occur, trade officers will have to be more specialized, possess specific skills and competencies, and be supported with the necessary tools and systems. This too will take time and effort. • Trade officers at posts with an InfoCentre have been able to focus on intelligence gathering which permits them to be more proactive and to offer more value-added services to their clients. As a result client relationships are improved at both levels, i.e., general enquiries and personalized services. • Trade officers at posts, in the not too distant future, are expected to have
access to an "enterprise information portal" which will give them a
personalized view of the CTCS' own information systems, as well as those
of other service providers, based on their user profile.
Conclusion The new digital economy is fundamentally transforming the way business is being conducted. With the advent of e-business, substantial cost savings can be achieved and endless opportunities can be opened up for international trade. This is having a profound impact on business and government alike forcing them, as they embrace e-business, to rethink their raison d'être. However, these organizations must also be prepared to embrace change. The experience and current thinking of the CTCS offer an integrated approach to managing that change at all operational levels. As mobile computing and e-business technology converge, the dynamics of business will change even more dramatically. Indeed, with mobile business, or m-business, people will have access to the Internet through their phone thus bringing the concept of "anywhere, anyhow" to reality. Overseas trade development services can expect many more clients and more competition for its services.
Selected References(12) Marketing to the Digital Consumer Kierzkowski, Alex; McQuade, Shayne; Waitman, Robert; and Zeisser, Michael. The McKinsey Quarterly, 1996 Number 3, pp. 4-21. Many marketers are waking up to the potential of the interactive consumer market, but few have yet figured out how best to leverage that potential. An analysis of 95 Fortune 500 consumer marketing companies with product - or service-related Web sites revealed that most still treat interactive media like any other traditional marketing channel. The result is an uninspiring collection of applications which appear to ignore the unique characteristics of interactive media; namely that each user can be identified individually, that it allows for two-way interaction, that services can be tailored for each individual customer, and that purchases can be influenced and made online. Though digital marketing is still at an early stage, the authors believe it is an attractive proposition to many more consumer product or service categories than is typically assumed, and that most consumer marketers - be they in financial services, travel, music, books, or even food and beverages - should be exploring it. To help them, they have built a new business model which incorporates five factors they believe are essential for success in digital marketing: the need to attract users, engage their interest, make sure they return, learn about their preferences, and relate back to them with a personalized product or service. A Revolution in Interaction Butler, Patrick; Hall, Ted W.; Hanna, Allistair M.; Mendonca, Lenny; Auguste, Byron; Manyika, James; and Sahay, Anupam. The McKinsey Quarterly, 1997 Number 1, pp. 4-23. Interactions - the searching, coordinating, and monitoring that people and firms do when they exchange goods, services or ideas - pervade all economies, particularly modern developed ones. They account for over a third of economic activity in the United States, for example. Interactions also exert a powerful influence on how industries are structured, how firms are organized, and how customers behave. And they are about to undergo dramatic change. A convergence of computing and communication technologies is set to increase our capacity to interact by a factor of two to five in the near future. This enhanced interactive capacity will have profound effects on the structure, strategy, and competitive dynamicsof industries. Companies will need to adopt new mindsets, new measurements, and new vocabularies if they are to survive in an environment of plentiful and cheap interactions. This article alerts them to the opportunities and threats of the new age interactions, identifies the businesses likely to be most profoundly affected, and shows how existing assumptions about strategy and organization will need to be rethought. Getting to Global Byran Lowell, L. and Fraser, Jane. The McKinsey Quarterly, 1999 Number 4, pp. 68-91. Today, about 20 percent of world output is produced and consumed in global markets. Within 30 years, more than 80 percent will be. As such markets emerge in food, health care, telecommunications, the mass media, accounting, and many other industries, the profit opportunities will be reckoned in the hundreds of billions of dollars. Companies will have access tot he most talented labor, the largest markets, the most advanced technologies, and the best and cheapest suppliers of goods and services in the world. But every business will have to compete with the best, and integrating markets are volatile and uncertain. During the transition to this new world order, geographically constrained economies will coexist with their emerging global counterpart. The picture will be confusing, but confusion creates opportunities. To understand their nature, say the authors of "Getting to Global," you must understand the way geographic barriers have influenced the character of industries and markets, and why and how these barriers are coming down.Getting Real about Virtual Commerce Evans, Philip B.; Wurster, Thomas S. Harvard Business Review, November - December 1999, pp. 85-94. In its first generation, electronic commerce has been a landgrab. Space on the Internet was claimed by whoever got there first with enough resources to create a credible business. It took speed, a willingness to experiment, and a lot of cybersavvy. Companies that had performed brilliantly in traditional settings seemed hopelessly flat-footed on the Web. And despite their astronomical valuations, the new e-commerce stars have appeared to be just as confused. Many have yet to make a profit, and no one has any idea when they will. Now, the authors contend, we are entering the second generation of e-commerce, and it will be shaped more by strategy than by experimentations. The key players - branded-goods suppliers, physical retailers, electronic retailers, and pure navigators - will shift their attention from claiming territory to defending or capturing it. They will be forced to focus on strategies to achieve competitive advantage. Success will go to the businesses that get closest to consumers, the ones that help customers navigate their way through the Web. Indeed, the authors argue, navigation is the battlefield on which competitive advantage will be won or lost. There are three dimensions of navigation: Reach is about access and connection. Affiliation is about whose interests the business represents. And richness is the depth of the information that a business gives to or collects about its customers. Navigators and e-retailers have the natural advantage in reach and affiliation, while traditional product suppliers and retailers have the edge in richness. The authors offer practical advice to each player on competing in the second generation of e-commerce. Strategy and the New Economics of Information Evans, Philip B.; Wurster, Thomas S. Harvard Business Review, September - October 1997, pp. 71-82. Millions of people are communicating at home and at work in an explosion of connectivity that threatens to undermine the established value chains for businesses in many sectors of the economy. What will happen, for instance, to dominant retailers such as Toys "R" Us and Home Depot when a search through the Internet gives consumers more choice than any store? What will be the point of cultivating a long-standing supplier relationship with General Electric when it posts its purchasing requirements on an Internet bulletin board and entertains bids from anybody inclined to respond? The authors present a conceptual framework for approaching such questions - for understanding the relationship of information to the physical components of the value chain and how the Internet's ability to separate the two will lead to the reconfiguration of the value proposition in many industries. E-Business Regulation: The Borderless Economy in a World of Borders PricewaterhouseCoopers LLP. E-Business Leaders Series, 1999. The fifth white paper in PricwaterhouseCoopers E-Business Leaders Series, entitled: E-Business Regulation: The Borderless Economy in a World of Borders, highlights the most important regulatory issues impacting the future of global commerce. The paper goes on to provide some clear advice on doing business in the digital economy, and also identifies the major organizations influencing the development of global trade policy in the world today. Organizations featured include the WTO, OECD, UCITRAL, ICC, APEC, TABD, WIPO and others. ___________________________________________ 1. Goldman Sachs 2. IDC Research 3. Pricewaterhouse Coopers 4. The Economist June 24, 2000 5. Value chain: an organization's set of interacting processes that create value for the external customer 7. Financial Times (June 5 2000) "Fair exchange in cyberspace" 8. An "infomediary" is an on-line middleman. 9. http://corporate.britannica.com 10. Speech from the Throne 12 October, 1999 11. A portal or gateway is a single point of access to aggregated information through navigation by the user. 12. Excerpts for articles are taken directly from their respective websites. Posted 02 September 2008 |
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