What are the basics of electronic business in the health sector? During my recent workshops on business, risk and governance, medical practice managers have asked me why electronic business is important to their organisations. Practice managers are pivotal in making transformation change across primary care and the local clusters in which they operate.
Here are my views on the basics and benefits of electronic business for primary health care organisations looking for collaborative, perhaps even competitive advantage.
Definition of electronic business
Electronic business (or e-business) is the combination of working environments, business and administrative processes, data, computers and networks which allow individuals, teams and organisations to collaborate cost-effectively in order to achieve shared objectives, irrespective of the location, ownership, people, resources and facilities employed.
Having working for global supply chain standards body GS1, my view is that e-commerce is a subset of e-business. The buying and selling of goods and services on the Internet - a much narrower definition. E-business predates e-commerce since retail supply chains have been using electronic data interchange (EDI) messaging across value added networks since the late 1970s.
Objectives of electronic business
- Improve speed and certainty of response to the needs of customers and consumers, by linking all relevant parties and by marshalling all resources in an integrated manner to serve end users;
- Enhance the agility of organisations to restructure well as changing conditions and opportunities demand;
- Reduce the total internal and external costs of operation;
- Achieve powerful synergies from individuals and teams being able to work together well and creatively across functional and organisation boundaries. Read our article about the legal risks associated with Personnel Records;
- Improve competition by linking potential buyers and sellers more cost-effectively.
Electronic business is allied closely to value chain (or value network) management. The value chain is the combination of internal and external resources needed to achieve an organisation’s objectives, irrespective of economic sector, private or public. Net value can be maximised by focusing on where value is added as well as on reducing cost, uncertainty and delay regarding overall objectives.
Value chain management aims to optimise speed, certainty and total cost through simplification and standardisation of overall business and administrative processes. It focuses on shared objectives among all the value chain participants, encouraging co-operation and collaboration which are manifested by joint processes and data transparency and enabled by sharing electronic working environments.
Electronic business + value chain = enterprise electronically enabled
The more simple and standard the new joint processes become, the greater the degree of speed, certainty and total cost improvement that can be achieved and the easier and more beneficial it becomes to apply electronic business. Using electronic business to support existing, diverse and fragmented processes is unlikely to be profitable, but applied to more simple and standard shared processes, it maximizes the degree of speed, service and cost improvement that can be achieved – a virtuous cycle.
Supply and demand
A well-managed business is a competitive one. Information Technology (IT) now plays a key role in enabling the processes, people and information necessary to meet the bottom line, provide for more and better jobs, and to support a sustainable economy.
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium of price and quantity.
The four basic laws of supply and demand are:
- If demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity.
- If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.
- If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity.
- If supply decreases and demand remains unchanged, then it leads to higher equilibrium price and lower quantity.
Basic business principles
IT governance is not achievable without first understanding your business and the markets in which it operates. Every organisation - private, public and third sector operates by supply and demand - the basic economic principle.
Controlling income and expenditure, including factoring in the cost of governance and compliance is fundamental to enterprise success. It makes sense to offset the cost of legal risk management against the competitive advantage that governance and compliance could bring to your business.
Incorporation and legal status
A company is a legally recognized entity existing within an economically free country designed to provide goods and/or services to another on demand for a price. It should be profitable in order to generate wealth for investors/shareholders. The shareholders appoint operators or directors to run the company. Both owners and operators have one main objective – the receipt or generation of a financial return in exchange for their work and acceptance of risk.
Benefits of business enabled electronically
The key benefits of business enabled electronically is intercommunication amongst stakeholders (or participants), improved business processes, and sharing and using structured data within a shared communications system. E-business brings together all existing and potential stakeholders important to the organisation:
- Customers; buyers;
- Suppliers, sellers, contractors; sub-contractors;
- Agents, transporters and financiers;
- Authorities, inspectors; information providers;
- Employees, workers; teams;
- End-users, consumers, clients, patients, citizens, claimants, communities;
- Non-users, general public
The advantages of stakeholder collaboration are:
- Two-way communication, knowledge-sharing, information exchange, skills and experience;
- New markets to buy and sell;
- Improved joint processes creating improved lead times, costs, capacity utilisation, uncertainty, write-offs and waste;
- Shared structured data for management and performance of value chain;
- Process and action data automatically instead of costly manual intervention;
Better internal and external processes
Regular review of internal and external processes can enhance speed, certainty and cost of operation
Sharing and using timely and accurate standard data
Functions and organisations are encouraged to use data transparency to minimise the adverse effects of focusing on individual rather than shared objectives.
For further information read our article on Supply Chain Data and Information
Benefits of an efficient supply chain
The supply chain (or logistical network) should provide a high level of customer service at a low total cost, encouraging high sales for marketable products. Failure to provide accurate and timely data, and sending out orders and invoices ad hoc will all give rise to operational problems, including:
- Poor customer service;
- Loss of sales;
- Higher inventory levels;
- Excess production, distribution and storage capacities;
- Higher waste and write-offs levels;
- More data errors about products and services, and buyers and sellers. This would result in the wrong products being ordered, delivered or invoiced, and payments delayed;
- Higher resource and operational costs.