Despite the subtitle of this 16-page paper, Vikram Lund looks solely at the financial services industry, although the same principles will apply to varying degrees to other “traditional industries”. The V-pattern of the title is a representation of three distinct and potent e-business forces - structural bypass, customer relationship reengineering, and enterprise realignment through value nets. Far from merely incrementally reducing costs, this interaction of forces will create a new business environment “that stimulates rapid change, fundamentally alters the rules competition and shifts market share”.

This paper explores the tumultuous changes foreseen in the financial services industry over the next five to seven years by explaining the three forces and their combined impact. “Structural bypass” uses network technology to bypass existing infrastructure to disintermediate, or displace, parts of the existing value chain. “Relationship reinvention” creates a Web-based delivery platform that both broadens and deepens customer relationships by acting as an agent and advisor in transactions that link different products, providers and sectors. Enterprise realignment uses the Internet to reduce process and infrastructure costs all along the value chain, from procurement and production to marketing and distribution.

The V-pattern framework suggests that the usual evolution of industries over time (as explained in ManyWorlds’ Industry Evolution model) will be accelerated, making it a strategic priority to understand the forces of change. According to Lund, over the last 25 years, companies have used only structural bypass, usually in the form of direct distribution technology, to assemble new, disruptive industry models. The V-pattern adds the forces of relationship reinvention and enterprise realignment to stimulate accelerated and sweeping change, shift market share between business models and players, and fundamentally alter the rules of competition. Naturally the reader should allow for possible bias since IBM is in the business of selling e-business. Yet this paper does a neat job of pulling together powerful forces for change and is worth considering.