Examples of spreading the risk

Let's look at a few businesses where unknowns and uncertainties prevail and see what strategies they employ. The simplest example I could find was my local newsagent. He have a thriving business, part of which is based upon delivering newspapers door to door in the locality. This work is carried out by school children, local teenagers.

Having a teenage son myself and knowing how fickle and unreliable they can be, especially when it involves getting up each day at the crack of dawn, I was intrigued as to how the newsagent always seemed to arrange reliable deliveries. It turned out that the unreliability of his workers were a factor taken into account. He always had an extra boy available and arranged the rounds so that each round could be completed in a fairly short time.

This seemingly inefficient arrangement allowed him to compensate for the known unreliability of his staff. If one boy didn't turn up he had a replacement. If several didn't turn up, the rounds were short enough for him to be able to ask some of the boys to do extra rounds. In this way he could ensure that he could maintain a constantly reliable and efficient service, even though he was employing an inherently unreliable staff.

The arrangement allowed the newsagent to dilute the risk, spreading it over a number of boys. If he'd have planned to use each boy in an optimally efficient way - employing just a sufficient number to cover the rounds and giving all of them an amount of work to completely fill their time - any lateness or absenteeism would have seen a breakdown in the reliability of his service. With many unreliable boys involved, this would likely have seen the service impaired almost every day.

If you now substitute boys with hardware, software and elements of a business plan, it will be seen how an e-business or e-commerce strategy will almost certainly break down unless there is sufficient redundancy and duplication built in. A fixed plan with predetermined elements can be likened to a chain: it is only as strong as its weakest link.

Time and time again, examples of e-commerce solutions can be seen on the Web that are totally dependent upon an assembly of pre-determined elements built as if every element was an optimal and reliable selection. There is seldom any back-ups, no duplication of elements, no alternatives to switch into. They are constructed like a chain: vulnerable to any weak link.

There is so much uncertainty and so many unknowns involved in e-business and e-commerce that any planned e-business or e-commerce solution will be as vulnerable to failures in the same way as a group of unreliable paper boys. This situation requires a complete change in attitude by those responsible for the design of e-business and e-commerce solutions. It calls for the downgrading of expertise and elitism and the promotion of realism and humility.

Failures and mistakes must be an accepted by-product of a successful strategy. A strategy that does not produce failures and mistakes must be suspect, perhaps designed to under perform. Strategies must assume that every decision could be wrong and back ups, alternatives and redundancies built in. It may seem inefficient, but, as my local newsagent has discovered, this is the only way to provide a reliable service that will survive and be able to keep ahead of its competition.

Another business that has similar unknowns and uncertainties is the book publishing business, particularly the technical book publishing field. Although acquisition editors try to keep up with technological events as much as possible it is impossible for them to be fully knowledgeable in any particular area. Authors make proposals, acquisition editors make intelligent guesses, sales and editorial teams have selection meetings, but, nobody can really know how a book is going to turn out before it is written.

This is particularly true of books to do with computer technology, digital communications, the Internet, e-business and e-commerce. Technological changes happen fast, but, the production time cycle for a book starting from its commission to its eventual printing and distribution can take several months. This is a long time in such fast changing fields.

The publisher's strategy is to gather all the information they can, trying to spot market trends and the directions of technological advances. With whatever clues they can muster they will then make woolly judgements and commission a range of books knowing that many of them will be failures. They will try to ensure though, that their selections are such that there is a strong possibility of there being winners among them - enough to show a profit on the whole range.

The publishing industry is well established. It has evolved strategies to cope with unknowns and uncertainties. It is dealing with similarly, technologically influenced, products as e-business and e-commerce. Shouldn't we be looking here for some clues as to how best to approach e-commerce? It can be observed how the book industry follows trends. It can be seen how, following a trend, often sees a subject swamped with the publication of many similar competitive titles all coming out at the same time.. It can be noticed how rapid changes in technology can so quickly cause books to become out of date - sometimes even before they get onto the bookshelves.

Some books are right on the ball, up to date and complete with all the latest advances. Some are incomplete, missing whole swathes of new developments. How are the publishers to know before the book goes on sale. Even with good technological reviewers, inadequacies are often missed. Yet the industry copes and remains profitable by using a strategy of risk spreading

E-business and e-commerce have many parallels with the technical book publishing business. The decisions and choices in e-business and e-commerce are similarly affected by changing events, new technological developments and competitor initiatives. Like a publisher's book selection, isn't any hardware, software, technological choice, solution or strategy just an intelligent guess that is made from a position of incomplete knowledge.

The strategy of the publishers is to go for a broad selection of titles. They will not publish a single book on a particular topic, they'll publish several. They keep their initial costs down so that they can produce a variety of possibilities. They stop printing the losers and let the winners run. Shouldn't e-business and e-commerce ventures be approached in the same spirit?