Platt Perspective on Business and Technology

Virtualizing and outsourcing infrastructure – 3: the online store as test case

Posted in startups, strategy and planning by Timothy Platt on April 12, 2011

This is my third posting in a series on building for a 21st century business infrastructure with the first two installments appearing as:

Part 1: developing a lean core competency business model and
Part 2: identifying where lean makes sense in a business.

I discussed this in general and then examined issues involved here using a well planned-out, lean and focused startup business model approach. In that my suggestion is that any business, no matter how long it has been in business, should approach lean infrastructure with a startup mindset, thinking and acting as if their resource base were limited and without any extra slack or room for accommodating waste. Then you would build, develop and sustain with a results-oriented focus and with a well planned out sense of goals and priorities, and of needs, in-house and outsourced for achieving them.

I mentioned a second possible paradigmatic model for lean infrastructure when I first brought up startups as a model for development: online stores. As general background to my approach to online stores per se, see Business Strategy and Operations, postings 34-38, 40, 43, 44, 46, 49, 51, 53, 55, 57, 64, 66, 68 and 119 for my 19 installment series to date, on building and managing an online business.

• One of the defining features of an online business is that fixed physical plant and infrastructure can be quite limited. A fully-online storefront business does not need to maintain a bricks and mortar storefront capability to operate and succeed, or in many cases, dedicated formal back office space either.
• Depending on the business itself, it may very well not need to maintain warehousing capability on its own and even if it is a sales operation with a primary focus on procuring and selling physical products. Here, the business may in fact primarily be producing supply chain services for enabling customers to find and secure quality vetted products in combinations, quantities or other business distinguishing ways that competitors do not match. Look to the lengthy list of performance criteria that would make sense to and bring value to customers to identify supply chain value added points here. Consistency of product availability at competitive prices, vetted quality control for product types where quality can vary a great deal, creating uncertainty for the marketplace and a lot of other factors enter in here, that if handled better than the competition can constitute sources of unique value proposition.
• And of course with virtualization and cloud capabilities and with third party hosting services much of an online store’s information technology in-house expenditure can be limited or even eliminated too.

In a way, a really effectively developed and managed online store can serve as a role model as to how far a business can go in moving to a lean infrastructure approach. The question this raises in practice is one of which aspects of your results-oriented business really would more cost-effectively be physically retained and supported in-house and which resources could be accessed but not exclusively owned. Here, costs include both direct monetary expenses and indirect expenses, including for example, risk liability exposure where business information may be housed off-site, or business continuity concerns. I will turn to this set of issues in the next installment in this series.

You can find earlier postings to this series and a range of related postings at Business Strategy and Operations, and on other directory pages on this blog, listed to the right in the blog template.

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