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E-commerce is not a technology play. It's a relationship, partnering, communication, and organizational play, made possible by technology.

Where you can identify the information content of the relationship independent of the people, therein lies the possibility for an e-business that will truly "blow up" its offline competitors.

The Net is a medium of communication that's fundamentally changing the architecture of corporations. Throughout the twentieth century we had vertically integrated models. That's because, as the economist Ronald Coase explained sixty years ago, the costs of transaction, search, coordination, contracting-broadly, the costs of partnering-tended to be greater than the cost of doing things within the boundaries of the corporation. But the Net has enabled the creation of an infrastructure in which such costs are dramatically lower.

For all its promise, the Internet is too noisy a place. It brings us information in real time and at no cost, but it will never displace those who provide real insight and leadership. The ability to spot the trends in the glut of information is a human art. The future will provide a premium for leaders who offer such wisdom, and an audience willing to pay them.

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Software is a gas. It expands to fill its container...After all, if we hadn't brought your processor to its knees, why else would you get a new one?

It's important for the CEO to view the parts of the CIO's organization devoted to providing infrastructure services (e.g., company networking, systems management) differently than other "business-facing" departments. The former are not strategic activities - frankly, they're more akin to utilities than core businesses - and it's unfair to judge them on the basis of return on investment. They're requirements and costs of doing business. By failing to separate IT service from IT strategy - and comprehend that the CIO is ultimately responsible for both - CEOs often grow frustrated with their chief technologists, confused as to whether they should be asked to provide merely utility or something much more critical than that. The answer is, CIOs need to manage both, and for the relationship between CEOs and CIOs to work, that unique dynamic has to be understood.

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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The limitations of space have long dictated the economics of exchange transactionsÂ…In the Network Economy, the limitations of space no longer applyÂ…But a funny thing happened on the path to frictionless capitalism. The economics of distance died, but the economics of attention took its placeÂ…But in many markets, customers find themselves overwhelmed with vendors clamoring for their attention, and vendors find themselves in a desperate battle to acquire customers. Customers still need to search, evaluate, negotiate, and configure products on their own. What customers gained in reduced transportation costs, they seem to have lost in increased search costs. These search and evaluation costs continue to create significant friction in commerce.

Industry leaders are smart about their use of technology. They understand that IT is an enabler, a means to a business end that is always measured in market position, operating results and earnings. If such a company happens to become a technology innovator as a by-product of these objectives, fine. Otherwise, they are willing to let competitors absorb the cost and risk of technology experimentation and to let Moore's Law (which states that data density will double every 18 months) work its efficiencies over time.

Historically, the critical interfaces for IT have existed with the functional departments. Key business processes such as finance, human resources, and marketing weren't standard between companies and, in many cases, weren't even standardized within an enterprise. In such an operational environment, business-process automation software was often custom-built to bridge the gap between the IT infrastructure and the rigid business-process architecture. It made sense to keep the IT function in-house so the interfaces between functional departments and their supporting systems could be tightly integrated.

This historical fact is perhaps the most compelling argument against using core competency to make outsourcing decisions. When it made sense to keep IT functions in-house, IT was no more a core competency of most companies than it is today. The reason outsourcing didn't offer a compelling value proposition is that it violated the principles of Value-Chain Analysis: The interfaces that linked critical business processes weren't standardized.

Designed by and for the smart, the Internet appears to be a neutral space, but its three organizing principles -- egalitarianism, elitism, and efficiency -- are organized in such a way that the smart get even smarter.

CRM was originally intended to provide sales reps with a system for managing information about their contacts. But it's grown into an eight-headed monster with ambitions to improve customer loyalty, enhance sales-force efficiency, and enlarge management control. Typical implementations, though, have done none of these well. Why?

The answer, in part, is simply that many companies' reach has exceeded their grasp. They've designed overly ambitious and complex CRM systems that they can't implement effectively. Worse, many of the solution designs have such a limited understanding of how a company grows that even if they're perfectly implemented, they fail to deliver the intended benefits. To a hammer, everything looks like a nail; to many IT professionals, everything looks like a process. In supporting your company's growth ambitions, this is a dangerously narrow viewpoint that limits IT's impact on the company's growth performance.

Unlike many systems, ERP suites are designed under the assumption that an organization will modify its business processes to suit the software, rather than the other way around. ERP systems work most effectively in an organization that integrates processes across all parts of the enterprise, freely shares information, and uses common terminology. "You have to step back from ERP and realize that its success lies as much with business process reengineering and standardizing business rules and processes as it does with the software."

The reality is that an ERP system locks in the operating principles and processes for the corporation. Once the ERP system is installed, the odds of being able or willing to pay for modifications are close to zero. The cost; complexity; investment of time and staff, and implications and politics of untangling such an expensive investment prohibit most companies from tackling this issue. Consequently, it is important that ERP systems be implemented in a business-driven, cost-effective fashion from the start.

Technology by itself can't make a company or leader great. The role of technology is to accelerate greatness that's already there, not to build greatness in the first place.

Historically, a lot of the value of technology was in automation. There was a pretty good alignment between the systems investments and the functional authority. It was a matter of automating existing business processes. What's happened over the last 10 to 15 years is that we have offshoring, outsourcing, and value-chain relationships that get more and more complex, and we're actually trying to use IT to enable processes that don't exist.

Now, all of a sudden, the CIO, who was clearly enfranchised to deal with technical matters, isn't clearly enfranchised to deal with the other issues. And often the rest of the management team lacks clarity on the objectives we're trying to accomplish. So it's important to build consensus among the management team. In an ideal world, the CIO might be the facilitator of that consensus, but those aren't necessarily the traits for which CIOs have been selected over the last 20 years. I think there's a potential mismatch that's both an opportunity and a danger as companies count on IT-enabled initiatives to provide more of their competitive advantage.

In the information technology world we tend to make everything explicit. We don't understand how to design for the sub-conscious mind - we design for the conscious mind and we only pay attention to content. But humans pay attention to context as well as content, that's how we make sense out of the world. Indeed...content without context is often meaningless or dangerously mis-interpretable. When you are having a conversation you are paying as much attention to the body language, intonation, pauses and rhythm of the talker (all part of the context) as to the content. So what's the equivalent of reading body language? In the physical or social worlds there are all kinds of subtle cues we unwittingly use to keep ourselves orientated. We can process astronomical amounts of information this way without feeling particularly stressed. IT overlooks this.

The heart of CRM is not being customer centric but rather using customer profitability as a driver for decision making and action.

The technologies of deception are increasing more rapidly than the technologies of verification. Now we have really powerful tools for deceiving one another.

You can view the evolution of technology...as the shift from process automation to practice enhancement. In the past couple of decades, the primary focus of IT investment certainly by large enterprises has been to automate and standardize the core operating processes of the business. The net result is, if you look at where the headcount of the enterprise is focused, it is on handling exceptions that get thrown out by the automated processes, and that can't be handled by the rules or procedures that have been specified. The real opportunity for technology now is to help people to address the exceptions -- it's typically more than one person, and it involves finding the right people, bringing them together quickly, giving them the tools necessary to address the exception, and then, probably most importantly, to create a record of the exception-handling so that you can see patterns emerge of where these exceptions are occurring over time. That's a huge opportunity for technology.

...One of the limitations we have seen of service-oriented architectures is that most of the investment and thinking around this has been very enterprise-centric. But if you look at where most of the exceptions emerge, they are in the business processes that span multiple enterprises -- in supply-chain activities or customer relationship management, or the coordination of distribution channels or channel partners. That requires a very different lens for viewing IT architectures.

It turns out there's this thing called great management, and...there's a...positive relationship between good management and effective use of IT. People who just improve management practices get a benefit, and people who invest in IT without good management get a negative result. So on your path to improved productivity, you're better off putting management practices first. People who improve management practices and invest in IT get the most benefit at all.

Treating IT as a different animal creates problems. It's developed its own language, myths, and mystique that give IT managers a get-out-of-jail-free card. When you have this mind-set, it means that it's OK that a $10 million project got screwed up. If any other project had been screwed up, people would have been held accountable. But managing IT is not about managing technology; it's about managing the people who manage the technology.

Traditionally, most companies allocate IT funds based on net present value (NPV) or ROI. The problem with this approach is it naturally favors projects that deliver productivity benefits, even when other projects with less tangible value may be more important to the overall business strategy. Projects with the highest NPV or ROI don't necessarily create the most value. What really matters is whether an investment supports critical business processes and affects key value drivers.

CIOs should ask themselves two questions: "How well can we convert business ideas into business processes?" and "How flexible are my systems to translate BP into IT?" Those who make this transition will be the facilitators of their companies' success. If not, they will be the bottleneck. The choice is clear: CIOs must be the bridge in the logic chain between strategy and operational excellence.

Economists have been writing about the Network Effect since 1974, intrigued by the notion that, once a network is established, scarcity isn't the source of perceived value; instead, ubiquity is. In the physical world, the more fishers who come to a lake, the fewer fish each one will catch; the lower the benefit, and hence the value, for each one. In the cyberworld, on the other hand, the more people who participate in an online network, the greater the benefit-the larger the network, the greater the likelihood that you'll find the person, information, or resource you're seeking. The difference between these two analogies is simple. Fishers aren't adding fish to the lake; online users are.

Averages are messy. We don’t just want to know what our average overall site conversion rate is based on all of the traffic we get. We want to know what our conversion rate is for those visitors who are highly targeted, separately from the conversion rate for those who are less targeted. This will really help us understand how we are truly performing with the traffic that has real motivation to buy what we offer.

An organization must, at the outset of considering using a CRM system, decide whether the main goal of the CRM system is to guide future behavior of the employees of the organization to shape the future (increase sales, number of satisfied customers, number of new leads generated, reduced turnover of key sales personnel, etc.) or to predict future sales so that the company can position itself appropriately to meet the expected demand. For a CRM system to provide both types of services (predicting the future and helping shape the future) a huge undertaking must take place and one that understands that these two uses of CRM are separate. Using CRM in both of these ways at once, (predicting and shaping the future of sales for the organization) may even require separate, but integrated planning teams to pull off this type of "daily double."

I believe CRM is built on a fallacy because customers don’t want a relationship with their bank or their grocer or their supermarket.

Tesco does not have a CRM programme. Tesco has a loyalty scheme and what this is saying is, ‘we get your data for giving you money back, and with the data we will give you a more relevant experience in our shops because you choose to shop there’.

Much of the hype surrounding CRM overlooked the customer. There was nothing in it for the customer. CRM became a means of doing things more cheaply - such as introducing a paperless relationship and offering the customer a £5 discount for signing up online. And many customers were underwhelmed by such propositions.

In many systems, the whole is not the sum of its parts. The system takes on its nature by the interactions of its parts.

MGI’s research suggests that to foster innovation rather than merely spawn systems that are quickly imitated or promote the wrong goals, companies should focus on two priorities. The first is to identify the productivity levers offering the greatest opportunity for competitive differentiation: targeting the few specific levers that could well create a competitive advantage produces results more reliably than striving for improvement everywhere. The most promising IT initiatives usually evolve along with related business processes and build on an organization’s operational strengths. When taking this route, companies should beware the siren song of IT success stories from other industries, since the levers that matter in one sector may be irrelevant in another.

The second priority is to master the sequence and timing of investments. Many technology-based advantages, particularly those that don’t involve fundamental business changes, have a limited life because they diffuse rapidly through the sector. Timing is therefore critical if IT investments are to generate returns. Companies that get it right develop a clear understanding of how IT-enabled competition is evolving in their sectors. Investing ahead of the pack makes sense if the technology is hard to mimic, continues to yield benefits even if imitated, or offers great near-term value. Otherwise, companies can often hold down their spending and boost their returns by diving in only after others have made investments—and mistakes.

People spend a lot of time online not looking for something, or at least not for something that can be bought or sold. Marketers need to understand that the Web is not about them; it’s about us. Marketers and media sites keep thinking, “Well,if we can only tweak our banner ads right, we can get the same success rate as Google.” But they can’t, because a banner ad is usually shown to someone who is not looking for the item advertised.

A good architecture has a number of important characteristics. It is modular, allowing sections to be tagged, stored, and applied in different products. It is built on standards, providing for easier integration. It is configurable, letting one system serve many customer requirements. And it is updatable, allowing new features to be implemented without any need to discard large parts of older releases.