For business, the World Wide Web is revolutionary because it creates a single, universally accepted standard for communication between corporate business systems. Using a single set of communications standards and protocols, companies can participate and share in the emerging world of business-to-business e-Commerce.

Whether or not a company exploits this opportunity will depend upon how rapidly it adapts to a new business environment in which the supply chain is the principal source of shareholder value. At the corporate levels in major multinationals, accounting, legal, and merger-and-acquisition skills are more prevalent and highly prized than supply chain and IT expertise. So in such organizations, the necessary understanding of the supply chain's power is rare.

Therefore, it is no accident that the communications and computer companies have been the first to recognize and realize the value in their supply chains. This is not because their products are inherently any better suited to e-Commerce, but rather because their corporate management teams have a higher-than-average understanding of the technology and its implications. Today, the best companies in individual industries are not only breaking away from the rest, but also choosing to work only with the best. So it is imperative that multinationals drive up awareness and action fast enough to become credible partners in the value-chain network.

Embracing this challenge means embarking on a change process with the potential to release the $100 million or more of value currently locked in the supply chain of the average Fortune 1000 multinational.

In my work with Japanese organizations in Europe, I have seen the complex relationships that drive Keiretsus. Similarly complex relationships drive e-Synchronized supply chains. The new e-Synchronized organization is emerging that synthesizes the tight relationships of Japanese companies, the value-creating opportunity of Europe, and U.S.-style business-to-business e-Commerce into a new e-Keiretsu. These e-Keiretsus will form the basis of a new style of competition between organizations based on the relative effectiveness of their value chain.

Most of the key elements an organization needs to operate successfully in an e-Synchronized world already exist. The question for every multinational corporation today is whether or not it is developing the right capabilities to participate in the e-Synchronized supply chain.

So far, no one organization has succeeded in integrating all the key elements. Indeed, those closest to creating an e-Synchronized world are constrained by a shortage of trading partners with the same level of sophistication. Such companies have a powerful incentive to identify less-advanced companies and help them progress toward the e-Synchronized world.

Once a critical mass of these sophisticated multinationals develops, however, the pace of change will accelerate. Multinational corporations therefore must decide rapidly whether or not they wish to be part of the e-Synchronized future. If they do, they must determine what help they need to improve their capabilities, where they will get that help, and what they are prepared to give in exchange for it.

Organizations that will successfully implement the e-Synchronized supply chain share four key characteristics:

• They will have a highly developed ability to collaborate within their own organization.
• They will have extended that ability to achieve the same level of collaboration with other organizations.
• They will be able to adopt Web-based technologies in order to increase internal and external information sharing.
• They will be able to combine technology and processes to change the way they behave and, hence, to work more efficiently.

Judged by these criteria (as illustrated in Exhibit 1), companies fall into three broad categories, each successively nearer to breaking through into the e-Synchronized world. These categories are the unaware, the aware, and the sophisticated.

• Unaware. Farthest from that goal are the unaware, those multinationals whose development has stalled between a multiplicity of fragmented capabilities. They are characterized by the difficulty exhibited in building acceptance for common ways of operating; in developing collaboration between business units (let alone across company boundaries); and in learning from external role models.
• Aware. An order of magnitude nearer to transition are the aware—those multinationals that have already built integrated capabilities but are struggling to realize a return on their investment in the change. Typically, they have invested somewhere between $50 million and $75 million in their shiny new ERP systems—and untold further millions in solving the Y2K problem, integrating dispersed business units, and responding to structural changes such as the Euro. At the top of their corporate priority list now is to "find the money." And the supply chain, where the majority of most multinationals' costs and value are buried, is the obvious place to start looking.
• Sophisticated. Closest to the e-Synchronized world are those sophisticated multinationals that have already built new levels of capability by combining the best of existing practices with new ways of using Web-based technologies. They tend to be drawn from the electronics and high-tech sectors. They're also typically younger, rather than more traditional, companies.

Importantly, they have had the time, the money, and the incentive to create ways of doing business centered on the Web. As a result, Cisco Systems, for example, claims to have saved more than $500 million by totally reengineering its internal processes around Web-based self-service and integrating its operations with both customers and suppliers. Similarly, as its major competitors are struggling to move from 12 to 18 inventory turns per year, Dell has rocketed from 28 to 56, effectively eliminating finished stock and delivering profitability that its competitors can only dream about. For such companies, already consolidating their position in the Web-based world, the major frustration is the lack of sufficient partners with the sophistication required to progress to the next level of competitive advantage.

Building an e-Synchronized supply chain can logically proceed along the five key steps described below. Before an organization does anything, however, it must first determine its starting point. Andersen Consulting has developed a range of diagnostic tools of increasing sophistication (the simplest of which is available on the Web and can be self-administered) to enable any multinational to rapidly determine its current position on the e-Synchronized capabilities map. Those who find themselves among the aware need to assess their position not in terms of how far they are ahead of the unaware, but in terms of how far they have to go to join the sophisticated. But even the unaware need not despair. Given that their only mistake so far has been inaction, they still have the opportunity, with sufficient courage, advice, and encouragement, to leapfrog the aware.

Step 1: Master business fundamentals

Once an organization has established its starting point, it should forget about e-Commerce and ensure that it is getting the basics right. The defining characteristic of sophisticated multinationals such as Cisco, Dell, and Sun—ahead even of the ease with which they adopt and exploit technology—is the excellence of their conventional operations. Absolute operational excellence and continuous performance improvement together are the ticket to the e-Synchronized party. Although operational excellence manifests itself in different ways in different industries, its underlying characteristic is an ability to deliver stretch capabilities continuously and to execute changes within a deliberate performance improvement framework.

This is not the strong suit of most traditional multinationals—not because they lack awareness of this requirement, but because of their inability to force through change. The more sophisticated multinationals, by contrast, find it easier to deliver operational excellence, partly because they needed it to grow and partly because they are less constrained by their past. Traditional multinationals must be prepared to abandon their proprietary processes and systems in favor of industry standards and to sacrifice such totems as plants, offices, and even core capabilities.

Step 2: Learn to operate in the Web-based world

Once a company has established a platform of operational excellence and continuous performance improvement, it is ready to break through to the Web. Making the Web breakthrough is simply implementing on the Web what the organization has already developed in achieving operational excellence. The caveat is that, without that operational excellence, e-Commerce and e-Procurement are as likely to bring chaos as enhanced performance. Given the prerequisite of operational excellence, however, multinationals can achieve a reduction of up to 100-fold in the cost of each of the new e-Processes.

Step 3: Build new capabilities and relationships

One direct consequence of the Web's ubiquity will likely be a loosening of long-term relationships between organizations in favor of shorter-term liaisons. In the era of proprietary standards and processes, partnerships involved a major commitment by both parties. Unfortunately, these partnerships did not always turn out to be as happy or long lasting as the parties had hoped. In contrast, in the e-Synchronized world, where organizations all subscribe to the same set of standards, multinational corporations will come together in a series of brief cooperative engagements as expediency dictates. The key to success in this environment will be an ability to attract and assemble a portfolio of best partners.

Step 4: Manage complexity in real time

Inseparable from these developments are the challenges of increasing complexity and decreasing time scales. Operations traditionally regarded as too complex to manage as a whole have nonetheless been integrated, internally and externally, and required to respond globally and in real time. Although the e-Synchronized world offers a solution in the form of sophisticated tools and processes, it does require traditional companies to learn new ways of operating. Making the transition demands an ability to learn in teams rather than as individuals, to develop the skills required to collaborate with customers and suppliers, and to be prepared to experiment and learn from the experience.

Step 5: Embrace change

Getting its own people to change and to embrace the new environment will be most difficult for the traditional multinational. Management, whose traditional role has been to plan around the expected and then deal with the unexpected, will find that the expected has become rare and that the capability to optimize around the unexpected has become critical. The one lesson that today's sophisticated multinationals are unable to teach their traditional counterparts (because they have never themselves had to learn it) is how to achieve that change without squandering the resource of their most experienced people.