An example from the world of bricks and mortar

The difficulty in explaining and understanding complex systems, where most analysis is in terms of abstract modelling, is that it often hard to relate the theory to the real world.. This is particularly true with e-business where the rapidly changing environment doesn't allow the use of case histories. The idea of creating an e-business solution that emerges without prior planning; running several solutions simultaneously; collaborative learning without a consensus; these are difficult concepts to visualise without any concrete, real life examples.

Searching for suitable examples and case histories in the world of e-commerce at this time of writing is fraught with difficulties. Bearing in mind that there is a time delay of months, maybe even years, between the writing of this book and the reading of it, makes it almost impossible to find examples that are certain to remain in existence over such extended periods of time. A year or two in this rapidly evolving world of e-business is the equivalent of decades in previous eras.

For this reason, I have to go back to examples taken from the pre Internet world, where although not identical to today's situations, exhibit the same fundamental issues we are dealing with now in the new and uncertain environment of e-business.

The world of fashion is such an environment, very similar to that which exists in the world of e-commerce today. It is an environment of continuous and unpredictable change. Advanced stock planning is not an option and the whole industry is geared to watching market trends and responding rapidly to any change.

Large companies can deal with this situation more easily than small companies because they can offset misdirections by spreading risk over a larger number of different fashion styles, quickly repeating on lines that are selling and putting the slow lines into an end of season sale to recover some of the cost. For smaller companies, the risk is greater because there is less chance to spread the risk, but, they have the advantage that they are more adaptable and can respond quicker to radical new changes in fashion

During the 1980's, I made the mistake of putting all my eggs in one basket. I'd had an initial success with a range of female fashions, which suddenly put me into a higher league where I could open many in-store concessions spread around the country. Filled with the rush of success, I plunged headlong into this newly discovered world of apparently unlimited wealth.

The realities of this larger and more complex business environment soon became apparent. I encountered cash flow problems, manufacturing problems, logistic problems, a new kind of customer and on top of all this - a sudden change in fashion. Like a fish out of water, I was powerless to deal with the mounting uncertainties and was knocked completely out of the game, losing the whole of my business in the process.

Starting again, poorer but wiser , I was determined to avoid getting into a similar vulnerable position. I managed to rent a large shop at the back of a run down shopping mall in London's Oxford Street. The rent was cheap because the mall was due to close within a year or two so I knew there was no permanent position I could build up.

As this shop had two entrances, I divided it into two. In one half I sold cheap fashion clothes that I could buy from local wholesalers. The other half I retained for developing my big plan. At the same time I rented a workshop where I had a designer making up clothes which I was selling in a boutique fashion market in Kensington High Street. Although I was spread pretty thin, I had a flexible range of options that could provide a number of different directions to pursue.

My big plan had been to create a shop that sold jewellery components that people could have made up into jewellery of their own design. This was my principle interest and I was certain it would pay off big because everybody was telling me what a great idea it was. Starving all the other businesses of cash, I spent lavishly on display and decor on this exciting and revolutionary new venture. Unfortunately, it didn't take off. I tried everything I could think of to get this jewellery shop going, but, the great idea just didn't work. More problematic, it was draining all the profit out of the other businesses - limiting my ability to develop them.

The mall in which my shops were located was situated at what was then the "scruffy", unfashionable, eastern end of Oxford Street. There were always many street traders around, fly-pitching in the empty shop doorways, and it wasn't hard to see that some of them were making quite a lot of money. In my frequent walks along the street I'd often talk to them, asking them how trade was that day, the type of customers that were on the street, the state of the weather and the activities of the local police.

Although to the casual observer these fly pitching traders were scratching together an uncertain existence, in fact some of them were quite established and had been working the street for many years. They'd found that the fines imposed by the occasional arrests for street trading were far less than what they'd have to pay in regular rents. Also, the police arrests were very infrequent because when they were arrested, their stock had to be removed and taken down to the police station with every item recorded and booked in. This was a miserable task for the arresting officers because the street traders stock usually amounted to thousands of items. This made them very reluctant to make arrests, so, as long as the street traders didn't cause any flagrant annoyance to passing pedestrians they were usually left alone. This gave them a kind of permanence that allowed them to adapt to the unique trading conditions in this particular part of Oxford Street.

I learned a lot about trading from these street traders. I'd often have long chats with them in the local cafe, which most of the local traders frequented at various times of the day. During one of these chats, a wily old street trader whom I'd got to know quite well, propositioned me to run a table outside of one of my shops selling leather wallets (purses as they are called in America). As I was despairing of the success of my custom made jewellery business and was somewhat intrigued by his business acumen I took up his offer .

The street trader took me to a run down warehouse in London's East End, where we spent a few hundred pounds on a miscellaneous assortment of cheap wallets that had been made in China. The wallets were bought at a range of different prices, so, I was quite surprised when the wily old trader told me we had to sell the wallets all at the same price. "Won't we sell all the dear wallets and be stuck with the cheap ones?", I asked him. He just smiled, then tipped all the wallets out together onto an old baker's tray he'd picked up in the street somewhere and laid them out on a trestle table outside of my shop.

To my amazement, the table was soon surrounded by people. They were sorting through the many different wallets and, unbelievably, the cheap wallets were selling almost as well as the dear wallets. Even more surprising, the money being taken on this table was several times the amount being taken by both of my two shops put together. Even before the day had finished we had to take another trip down to the wholesalers to restock.

The success of this little venture, besides saving me from bankruptcy, also taught me that the type of business that was successful in the back of a run down shopping mall was far different from the kind of original, trendy trade I'd been planning. My great plan had been too sophisticated for the kind of customer that shopped in the unfashionable part of Oxford Street. As for the dresses in my other shop, they were in competition with hundreds of similar fashion shops which any potential customer would have to pass on the way to mine.

The eye opening experience of this little venture with cheap wallets gave me a fresh perspective on trading. I had many contacts with wholesalers and retailers in and around the "Rag Trade" areas of London, so, I went round to them buying their end of lines, remnants and second quality garments and piled them all into one of my shops with a big sign that read "Everything at one price: £3.99". It was an immediate success and lasted until the mall closed, giving me the cash flow and leeway to work on my other options.

Although this example may appear to be a million miles away from creating e-business solutions, there are some fundamental issues that are directly related to creating businesses in the fast changing, uncertain world of e-commerce. I'd moved into what for me was a new and unfamiliar environment. I'd covered myself with a number of options and one of them, which came unpredictably out of the blue, paid off. The break through had come as a result of mixing in what could have been viewed as an incongruous community. Through a process of collaboration I'd discovered a crucial clue to trading in an unfamiliar environment. I'd taken the clue out of context and combined it with my familiar world of contacts to produce a viable business situation.

It isn't really a big jump to map this situation across to creating e-business solutions. For everyone, the world of e-business is just as foreign as the run down mall was to me. Just like the street traders in Oxford Street, there are many different people dabbling around in the environment of e-business - succeeding in various little ways which pass unnoticed by those who are too absorbed with their great plans and ideas. Hanging out in list serves, striking up acquaintances with seemingly irrelevant specialists can produce just the right clues to bring a number of assorted ideas and contacts together to spark off a successful e-business venture.

This kind of business trading though is a very big conceptual jump for executives brought up in a traditional management culture. They will assume that all decision making is a rational process. But, in the non linear, chaotic environment of e-business, reasoning and rationality have no place. It is about chance, risk and unpredictable emergence. This is why Game Theory is preferred to Decision Theory.

Later, when we get on to discussing the cafe as a device to be used for communication in an uncertain environment, we'll see that the idea of splitting up the collaborators into different tables is to maximise the number of possible solutions that can emerge. The worst thing that can happen is for everyone to get together to form a consensus.

If I'd have put the idea - of selling cheap wallets out of an old bakery tray on a trestle table outside of my shop - to the team of people working for me at that time, it would have been laughed out of existence. No rational brainstorming session could have ended up with this as a possible solution because no one could have been able to identify with the situation of selling cheap wallets in the street.