Contrary to popular opinion and despite the "I told you so's" of the nay sayers, e-business did not die in 2001. It's just in hospital having a reality-check.

It is getting better and I predict that it will make a comeback and continue to make a fundamental change to the landscape of business and people's lives - but in a more ubiquitous form, either just after Christmas this year or 2004 depending on global circumstances.

A Brief History to Date of E-Business

E-Business was meant to deliver total customer focus and convenience, zero error rates, minimal start-up and running costs and rapid sales and share-price growth. It was going to displace the inflexible, capital-intensive, corporate world, with a new business order creating new markets low cost markets.

New virtual business models were emerging every month. (Remember terms such as many to many, land-grab, aggregator, market maker, reverse auction) Events such as First Tuesday, NetProZ and Digital People became magnets for graduates working–up a business plan in their spare time, with a view to becoming paper millionaires within a matter of months. This phenomenon scared the corporate world.

In response, many "traditional" insurers began corporate venturing programmes and created start–up innovation labs – usually with an "arms–length" remit. In order to learn quickly, they mixed their brightest managers with external recruits and allowed them to experiment in a controlled safe environment. Subsequently, most (but not all e.g. Prudential) were closed down following varying levels of success.

It is interesting to note that as far back as 1997, a British writer – Michael deKare Silver (Future Shock (1997) and e-Shock (1998) – Macmillan Press) had identified three stages of e–business development, and had predicted the boom, bust, growth of dotcoms:

1. High Growth Rate Stage

The first part of this stage was driven by gut feel with "First Mover Advantage" being the key driver. The result was a plethora of low value dotcoms and considerable duplication of efforts in within businesses. Fulfilment and scalability started to emerge as potential issues.

As the panic set in, this stage became driven by the need to compete with peers and a "me–too" syndrome developed. Some businesses took a more strategic approach, tending to back a handful of their best e–plays with big budgets. To get round the fulfilment and anticipated scalability issues, they launched large IT programmes.

2. Shake Out and Consolidation Stage

Slower than anticipated customer conversion rates started to become apparent with the subsequent results being unjustified efforts and visible failures. Only a few stand–alone e–brands survived. As a defensive measure, insurers integrated their successful start-ups back into their existing businesses and closed the others.

The problem was compounded two–fold:

• The rise of corporate governance was making risky non-core ventures unattractive.
• Apart from the "innovators" and "early adopters" customers were too conservative and were not prepared to change their buying behaviours at the rates required by most "sell" driven business models.

As a result, insurers focused on the new ways of buying and selling their existing or near products and services along side traditional channels. Helped by the development of XML standards, the focus switched to back office integration. Insurers began to realise that they could reap the financial benefits of the Internet without a website or selling online. This was the start of e–enablement.

This is the stage many corporates generally are at the moment. It is e–enablement proper and is being driven purely by internal cost reduction and efficiency gains. There are fewer market risks or issues of trying to influence / change buyer behaviour. The more switched on insurers are starting to discover the benefits of e–procurement (which requires only their buying staff to be trained in purchasing on–line) and business process outsourcing (which exploit the connectivity of the Internet.)

3. Sustainable Growth stage

As e–enablement programmes reach their completion and consumers start to buy more goods and services on–line, insurers are starting to revisit and rapidly develop the "sell–side" of e–commerce, but without making the mistakes of the past. Initially, internet best practice is being employed and co–ordinated from the "corporate centre". The mantra here is low risk, cost effective sustainable growth.

Marketing now consists of a portfolio of simple products being both "push" sold through multi–distribution strategies using CRM derived customer metrics and "pull" sold / offered using permission–led online marketing techniques. This is where fast–follower insurers are at this moment.

So Why Did It All Go Wrong?

Apart from throwing all the business fundamentals out of the window acquired over the last 250 years and apart from not researching and understanding the immediate addressable market, its consumer habits and dynamics – rather than the potential market, many did not fully understand e–business, its benefits and its limitations.

There are many forms of e-business, and the majority still do not involve the Internet. (EDI, VPN's, e–mail & e–mail marketing, SMS M–Commerce, Cable iDTV etc.) Also there are many successful e–business models using a hybrid of technologies – for example the marketing and fulfilment of personal lines insurance products.

E-Business is not the preserve of the Web, nor is it on E–business is about relationships – building them and communicating with others using a combination of both virtual on–line and real-life cognitively evidenced experiences. A key element of any relationships is trust. These are relationships are underpinned by four criteria working together coherently.

Networks And Connectivity

The beauty of the web is that (unlike VPN's, mobile or cable links) the customer has already funded a ubiquitous, generally reliable marketing, processing and information distribution network. However, this network is not secure and most users do not trust it. Instead they rely on the guarantees of trusted brands. It is also still relatively slow – even with broadband.

The Internet works because it uses ubiquitous open (messaging) standards. There are many versions of XML messaging standards – though this number is reducing. However, many successful business models do not use open standards, or if they do, only in part.

The strategic advantage of using open standards is around building flexibility and agility. This requires the businesses "will" to move quickly to exploit this capability.

People and Behaviours

People are naturally curious but at the same time cautious. The anonymity, safety and convenience afforded by the web fits well with this. However getting people to give information and break this anonymity has been quite a step, the increased trust to modify user behaviour a quantum leap, and enabling buying online even more so.

Although 45% of the UK Population has access to Internet enabled PC's, the proportion with the confidence and online buying habits is probably only 1/8th of this number.

Awareness of online brands has been found to decay at a much faster rate (perhaps 3 times due to the lack of physical interaction and reinforcement). This has led to phenomenal and ineffective marketing spends.

Lack of personal interaction shortens the time on line and hence to persuade / convert. However, the curious nature of customer behaviour means that they often will visit a website 4,6,8 times before making a transaction. The rise of permission marketing has gone a long way towards getting consumers to buy on–line

Process – Any Where / Self Service

This is a very low cost processing medium. The customers undertake the processing themselves and in return expect either an element of financial recognition or value form convenience and fault–free service.

With reasonable volumes costs of less than 10p per transaction can be achieved as opposed to two or three pounds sterling via a call centre. The need for high volumes and conversion rates has driven "process simplicity" and customer convenience. However this has also created commoditisation, removed many differentiators and will ultimately erode margins.

Information And Data

Insurance is about the exchange of risk for premiums with the promise of the return of claims monies in the event of a loss. The future business model will be about trading information about customers and their risks for information about money. In order for this to work effectively messaging standards will need to become far more widely accepted and used. The London market will need to build a far greater understanding of its customers.

Personal data has to be treated with more caution than in the past. The consumer has to be made aware of the efforts to achieve this.

So What Will The E–Business Ghost Of Christmas To Come Look Like?

The e–business ghost of Christmas to come will appear – but in a modified guise. The future will be about building sustainable business models heavily but not exclusively using, e–business and other related technologies.

This will involve more changes to the way we work. In saturated market places, the relentless drive to cut costs of non-value adding processes will continue. This is easier, less risky and the results more immediate. Characteristics of these new models will include the complete integration of customer processes / data and the switch from building a multi–distribution model to an agile, multi–access, multi–partner / JV business.

Steady rather than prolific growth, combined with the longer timeframes, a higher level of risk and sizeable infrastructure investments, will require a combination of quality strategic, financial and implementation management. Building a portfolio of projects with different but related outcomes will help to optimise opportunities and potential returns whilst minimising risk. Breaking the projects down into short simple rapid projects further reduces risk.

As a result, approaches using a portfolio of plays clearly linked to the overall business strategy (but not rigidly adhering to it), and comprising of transparent financially–evaluated business projects, market segments, distribution channels and JV's, built using –messaging standard" linked modular IT infrastructures are becoming "de–rigueur".

Ultimately, diminishing cost savings and ROI's on increasingly commoditised simple products and bundles, combined with lower infrastructure and entry costs will once more force businesses to innovate and extend the envelope.

Success will be about appropriateness, ubiquitous–ness, differentiation and adaptability.

Not all e–business failed. Some have been resounding successes. You only have to look at personal banking, air travel and the music industry to see the devastation to traditional businesses.

What the dot.com boom did to all businesses benefits was to force business to rethink their business models. It changed business strategy from a static planning based approach to managing dynamics and their interactions towards greater value. The key issues to recognise here are that:

• Successful business model are and will be appropriate for their market contexts. Some were too early – Boo.com and Time Warner / AOL, but the expansion of broadband may yet see these business models succeed.
• Business models that were either pure "e" or no "ev have not been as successful as mixed models. Ubiquitous–ness and its accompanying convenience will create the best business models. The level of ubiquitous–ness being determined by cost benefit and appropriateness. An holistic approach to the entire risk capital supply chain will be an essential part of this.
• Differentiation will always be the key to improving the top–line. Once all the unnecessary costs have been stripped out, Insurers will have to look at ways to differentiate themselves. In an information-centric world, this will come through using "process and dataflow innovation" to support the necessary complexity of insurer relationships – rather than dumb them down.
• Adaptability will be key driver. Insurers will have to build a capability to continually change – not through massive disjointed and disruptive change programmes but through a more predictable changing working life as part of "business as usual". The starting point to building this capability is in fully understanding your business, it's costs, processes, capabilities and limitations.

Insurers and business leaders should ask themselves how they can build more adaptable, appropriate, ubiquitous and differentiated business models for the future.