Changing Business Models For The Information Age
by Gerald Trites

When the impact of the information age, particlarly the internet, first started to be noticed, many observers noted that the then-new world of eBusiness involved significanly different supply chain structures. Instead of using the old supply driven approach, where production lines are fed with materials that go into production of goods that end up in inventory and become available for sale, they began using a customer driven approach, where goods are only produced after they have been sold.

One of the best examples among the new information age companies was Dell Computers, who adopted exactly this approach, building computers on demand.

The result of the customer driven approach is that the supply chain is steamlined, inventory levels are reduced and obsolescence is controlled. The approach has been so successful - not just for electronics companies - that those who do not adopt it are at risk of becoming obsolete themselves.

A case in point is the North American automobile industry, who have not changed their basic production model since they started producing cars, with the limited exception of Ford.

This lack of responsiveness to the realities of the information age, the lack of competitiveness that results from this lack of responsiveness, can perhaps explain the trouble that GM and Chrysler find themselves in. They have been asked several times by the US government to produce a viable business model, and so far have failed to do so. Their myopia is staggering. The Globe and Mail today carries a good story on this very point.