Why Extranets Matter

My last couple of blog entries have discussed technologies which cross organizational boundaries: Extranets and Groove. I thought it would be worth taking a few minutes to discuss why this is important from a business perspective, and to consider some of the patterns I’ve observed.


At an organizational level, Extranets are about using technology to move boundaries: boundaries of work, boundaries of access and boundaries of control. Many technologies can move these boundaries. Extranets are web sites which move these boundaries while preserving the more fundamental boundaries that surround organizational relationships, such as a client relationship. You’ll find that the same principles apply to other situations, such as eCommerce web sites (which are, in a way, customer extranets). In order to be successful, extranets and other inter-organizational technology must move boundaries in a way that is mutually beneficial to the organizations and people involved.


Let's start with a relatively low-tech (and more public) example. I came across an old photograph of a food market where I often shop, taken way back in 1921. The Mugar family had purchased Star Market in 1916, and hired helpful clerks to select and package up groceries for each customer.


Yet, that same year, a grocer named Clarence Saunders was about to change the world. On September 16th, he opened Piggly Wiggly, the first self-service grocery store, in Memphis, TN. At the time, there were predictions that this new kind of store would fail – with open shelves and shopping baskets, customers just helping themselves and handling the products - it was shocking to some!


Ninety years later, we not only take self-service shopping for granted, we also check ourselves out at point-of-sale kiosks, and before we can even bag our selections, we have updated the store’s inventory and marketing databases to boot.


OK, now let's look at how self-service shopping changed the boundaries of business. Shoppers began doing work which had previously been done by store clerks, selecting their purchases directly from the shelves and bringing them to the front of the store. This moved a work boundary, and stores needed fewer clerks, so they were able to charge more competitive prices and their business and profits grew.


Shoppers got something out of the self-service deal as well. They got to look at the merchandise directly and more carefully consider their purchases: a boundary of access was moved. Also, the traffic flow through the store was improved, saving them time. And the larger stores which resulted had more choices of merchandise at better prices. So this mutually beneficial change caught on in a big way.


Now I don't know about you, but when the self-service check-out kiosks first came out, I wasn't too thrilled. The machines were kind of buggy, and it took longer to check out than normal. I suppose I was also learning how to use the kiosk, and figuring out the subtle interactions with the supervising store clerk who had to intervene periodically to verify I wasn't ripping anything off. I was doing more work, getting less personal treatment, and not getting any obvious benefit. Bad idea.


Later, the machines got better, and now I sometimes use them when the lines at the human cashiers are too long. But overall, I feel like the time savings is just a ploy: they could have hired more cashiers after all! Maybe I saved a dollar or two because of lower prices which came from not hiring so many cashiers, but frankly I’d pay a little more for the personal service. So here is a situation where, speaking for myself anyway, success is limited because only one party seems to be getting a benefit, and it's not me. Have you ever seen anyone walk past an available human cashier to go to a kiosk? That will only happen when the kiosk designers figure out a way to reward customers for using the technology.


OK, now let's apply these principals to extranets.

How can extranets be made to be mutually beneficial, so they're worth creating, and they actually get used? How can we move the boundaries so everybody wins?


There are no hard and fast rules, so I’ll present some examples of successful extranets I’ve seen:


Scenario #1:

A professional services firm provides news and advice to its customers via an extranet. Customers can subscribe to notifications when new content of interest to them becomes available. This moves work from the firm to its customers, which is an obvious benefit for the firm. A less obvious benefit to the firm is that it can learn about what topics its customers are interested in, by analyzing the articles they read and the topics they request notifications on. Customers get the benefit of direct access, so they can browse around more freely and at any time; this, combined with the notifications, gives them more timely and broader access to the content. The notifications are important to remind customers to return to the extranet site. The advice won’t be as deep or as personalized as it would be from a human being; hence this is best as a supplement rather than a replacement for a personal advisor.


Scenario #2:

A coalition against domestic violence maintains a loose network of safe houses. A woman in trouble can call a hot line 24x7 and be referred to a safe house in her area where she and her children can stay until the situation can be remediated. The safe houses use an extranet to keep a central database of available rooms up-to-date. In this case, work moves from the coalition to the safe houses, which frees up coalition staff to work on other programs. Safe houses get to control their own data, which is easier than passing it over the phone. Everyone benefits from reduced errors and more current data.


Scenario #3:

A job placement firm provides job candidates with online access to advice, job postings, and one-on-one online collaboration with counselors. Work moves from the firm to job candidates, who now search for their own information. Candidates get easier and faster access to both the information and their counselors. They also can more easily search in multiple geographies because job information and counselors are available from any internet connection.


Scenario #4:

An online service provider allows its corporate customers to manage user accounts for their employees. In this case, both work and control move from provider to customers. The provider saves work; customers get more responsive and accurate account management. This is an example where it’s easier for customers to do the work than to relay detailed information to the provider by filling in paper forms or reading it out on the telephone.


Scenario #5:

A real estate company provides its independent agents with detailed home listings, personal web sites, and customer relationship software via an Extranet. Although no work boundary is moved, access boundaries move both ways: the agents get access to listings, and the company gets access to customer data. Everyone benefits from the listing information and personal web sites, which drive sales. The real estate company also gets to retain the customer data, even when an agent moves to another company.


What do these have in common?


First, they are all one-to-many relationships. In most cases, work moves from the “one” to the “many.” This demonstrates a basic characteristic of one-to-many organizational relationships, which is that moving work from the one to the many provides an economy of scale. Anyone who's organized a pot-luck supper will understand the idea.


Second, in each case the “many” (customers, clients, students, citizens, etc.)  get more access or control in exchange for doing this work. Without these benefits, the extranet won’t work unless users are somehow compelled to use it (the stick instead of the carrot).


I’d argue that the carrot – providing more benefits – is key to a long-term relationship; forcing people to do extra work or to share access for no benefit will eventually lead to resentment and ultimately the loss of customers. An example of the stick approach, not an extranet, but still a helpful example, is telephone systems which force callers to traverse a labyrinth of menus to reach an customer service representative. Almost nobody likes this, but sometimes we have no alternative, when calling a utility company for example. As soon as a competitor appears with a simpler or better alternative, customers will leave. This is not the desired result.


If you are thinking about implementing an extranet for your organization, you probably have already considered how it can save you work or give you more information to benefit your business. The bottom line is that this is only half of the equation! In order to be successful, you need to provide benefits in exchange, so people will use and rely on the extranet. Implemented in this way, extranets can serve to deepen organizational relationships, build loyalty, and ultimately provide a win-win situation for all parties.


This posting is provided "AS IS" with no warranties, and confers no rights. Thank you for reading it!

Comments (0)

Skip to main content