Best Practices: E-Business

Bricks, Mortar and Beyond: An E-Business Overview

According to TEC e-business experts Jordan Ayan, Wally Bock and Howard Coleman, the influence of e-commerce -- buying and selling goods and services on the Internet -- and e-business -- using Internet technologies to conduct business, serve customers and streamline processes -- has shifted from fringe market status to the mainstream. And the global marketplace is shifting with them.

As businesses re-engineer basic processes to meet the new challenge of e-business, greater benefits accrue, including:

• Far-reaching market penetration. More than 200 million people buy and sell on the Web. What other sales channel can compete with that?
  
  
• Lower transaction costs. Online customers research their own needs, compare price and features, place orders themselves -- all significantly reducing transaction costs for businesses.
  
  
• More efficient supply chain. Web-based tools improve a company's ability to integrate and manage the entire process from raw materials to consumer purchases.

For many businesses, the time is coming when one click of a mouse will activate processes throughout the entire supply chain -- linking manufacturers, assemblers, distributors, retailers and customers alike -- with an efficiency never before imagined.

Electronic commerce should be considered a serious business in its own right. Our TEC experts urge companies not to undermine their potential by trying to protect traditional models. Expect the new business to cannibalize the old.

From "Product Push" to "Customer Pull"

Once upon a time, businesses relied upon mass media and advertising to "push" their goods and services on the public. The Internet has virtually transformed this one-way equation; on the Web, customers "pull" the information they want, reaching out to numerous sources at the same time, and act upon it accordingly.

Web-savvy customers move easily from one sales channel to another; they can investigate a business online and then make a purchase in the physical store -- a process called "channel shifting." An effective e-business strategy should include "channel blending" -- building in processes that "remember" these customers as they move across channels and provide them with the tools to purchase from the business when they want to.

In the new global market, consumer expectations are high and the cost to the customer of switching from one business to another is low. When products become increasingly commoditized, satisfying customers is absolutely critical to survival.

Our E-business TEC experts suggest answering certain basic questions:

• What are the three or four primary things your customers want from you?
  
  
• What information do you send directly to these customers? What information do you send them through third parties?
  
  
• How can you capture and recall information about your customers as they interact with your goods and services?
  
  
• How can you improve your communication networks, transaction events and information flow to better serve your customers?

These "customer-facing" Internet functions can help target, acquire, serve, transact with, retain and grow customers:

• Marketing. Web-based applications can integrate marketing activities (press releases, customized marketing programs and other services) throughout the business chain.
  
  
• Building loyalty. Customers stay with sites where they can place orders, check shipping dates and configure products -- easily and conveniently.
  
  
• Service. Web applications offer personalized service through call centers, self-service tools, field service systems and resolution technologies.

Increased satisfaction builds long-term customer loyalty. It also generates effective barriers between your business and its competitors.

The "Wired" CEO

In nearly all respects, e-business is throwing the limits of conventional business thinking into stark relief. Instead of conventional goals -- saving money, gradually improving services, etc. -- the template for the digital economy stresses (1) speed; (2) a willingness to partner with others (suppliers, distributors, even the competition); and (3) a capacity to meet diverse, ever-changing customer needs and preferences.

The TEC experts recommend that CEOs convene a strategic planning session focused exclusively on e-business. Use this forum to answer important questions. How can we exploit Internet technology to improve our business processes? What existing processes or customer expertise can we leverage to our advantage? How can we use the Web to position ourselves as leaders in our industry?

Senior management commitment to e-business initiatives is the single most critical ingredient for success. This commitment includes learning about the Internet, finding the right people to design a companywide Web strategy and making necessary structural changes within the organization.

Information Is Power

Despite the changes wrought by e-business, certain fundamental principles remain the same. Customers are motivated by the same buying impulses as ever and, in general, use the same decision-making process.

What gets transformed in e-business is the information component. "Infomediation" could be the single most important core competency in coming years. Web-based customers are gradually shifting loyalties from companies that make the best products to those who make the best use of information about their customers. As a result, businesses must strive to develop the right infomediary strategy to meet the challenge.

How does a company make the most of the information it has? Our TEC experts advise the following:

• Assess your existing business systems and technology infrastructure. The goal is capturing information you can use about your customers' experience of buying and using your product. How well do your existing systems do that?
  
  
• Identify every business system that impacts your customers. How effective are these applications, databases and communications networks at organizing information, supporting your customers and helping them solve problems?
  
  
• Review all technical resources at your disposal. By understanding what you have -- and what you need -- you begin the process of defining crucial "next steps" necessary for sustaining online customer relationships.

Re-Engineering for the New Economy

In the rush to get up and running on the Web, the TEC experts say, many companies forget or overlook certain basics: those online processes that have a fundamental effect on the customer's experience. Web-savvy customers who have a bad experience on your. Web site may never come back.

Some pitfalls to avoid:

• Designing a glitzy site, but failing to integrate a functional back-end
  
  
• Launching new products without anticipating sales levels
  
  
• Predicting delivery of goods but not coming through, due to lack of integration with carriers or distributors
  
  
• Posting products for sale online, with inadequate information about them

Efficient fulfillment systems are obviously essential for e-business success. The TEC experts outline specific principles to keep in mind:

• Integrate front- and back-end services before launching an e-commerce initiative.
  
  
• Measure the true costs of Web fulfillment up front.
  
  
• Differentiate your business through guaranteed delivery, mass customization and online order status information.

Integrating data across channels -- including back-end applications such as customer relationship management, payment systems, inventory control, etc. -- isn't a long-range goal to keep in the back of your mind. It should be addressed immediately as part of a company's comprehensive Web fulfillment plan.

These days, a business has to at the very least meet -- and preferably exceed -- Web customers' expectations. That means seamless integration from the first click of the mouse to on-time, satisfactory delivery of product, as well as continuing relationships that build long-term customer loyalty.

The Boom in B2B

The Internet age brings with it not only changes in the way people do business, but new business models as well. Among the most significant ongoing changes is the steady transformation of business-to-business (B2B) transactions.

Many companies are using the Web to build new bridges between themselves and their strategic partners. Buyers and sellers who may have never encountered one another in the physical world can now gather and move huge amounts of basic goods like never before.

Most B2B sites fall into two major groups: horizontals and verticals. A horizontal site offers products that nearly all businesses need: office supplies, capital equipment, maintenance and operating supplies. Also known as "functional hubs," these sites provide the same function or automate the same business function across different industries.

Vertical markets, by contrast, operate independent, industry-specific trading sites. These sites offer everything from raw materials to finished products within a particular industry, where no single buyer or seller dominates the market. Vertical hubs are effective in:

• Overcoming fragmentation between buyers and sellers
  
  
• Eliminating inefficiency in existing supply chains
  
  
• Facilitating sophisticated search mechanisms for businesses

Hubs, acting as a new breed of intermediaries, serve to ease the flow of B2B commerce. For buyers, they help lower purchasing costs while gaining access to new suppliers. For suppliers, they lower sales costs and gain new customers.

For many companies, the most critical ingredient for e-business success may be evolving into an infomediary. The ability to provide information becomes in the Internet age a truly value-added service. The infomediary positions itself as a trusted third party that serves as a kind of broker, marketing information to businesses on a customer's behalf while also providing advice or research to help the customer make an informed buying decision.

The best B2B hubs, say the TEC experts, substitute information for inventory. That's where true business value lies.

Clicks and Mortar: The Future of E-business

Personalization will have a major impact on e-business, the TEC experts predict. Adapting your product or service to individual customer preferences will be the surest means toward converting Web browsers into Web buyers. Done correctly, personalization leads to customer loyalty and trust. That generates unique opportunities to cross-sell related or complementary products, or to up-sell into higher-ticket items.

Growing customer demand will likely compel pure play Internet merchants and traditional retailers to join forces sooner, rather than later. "Joining forces" could take the form of coming together in mergers or strategic partnerships; outright acquisitions may also play an important role in future e-business endeavors.

The key to future success, according to the TEC experts, probably lies in a hybrid model that combines the best attributes of both physical and digital business models -- a "clicks-and-mortar" approach. In all likelihood, this model will trigger greater business transformations than we can presently imagine.

Visionary business leaders see that the best response to the challenge of e-business comes from unconventional thinking, fostering a culture that embraces rather than fears change, and planning that goes far beyond existing infrastructures. True change, say the TEC experts, goes much deeper than merely opening a company Web site.

Contributing Experts:

Jordan Ayan

Jordan Ayan is a leading international speaker and consultant to corporations, entrepreneurial organizations and associations on innovation, technology and creativity. He is CEO of Create-It! Inc., a Chicago-based firm noted for its results-based work in helping companies develop creative new business models using the Web and new technology. As a vice president of a Dun and Bradstreet division, Jordan orchestrated a strategic alliance with American Express, leading to development of FastData. This leading online business service sold for more than $50 million. Jordan's firm publishes the electronic newsletter Executive Technology, available free of charge to TEC members (to subscribe, send an e-mail to etb@create-it.com). He is a regular contributor to Inc. magazine and author of "Aha! - 10 Ways to Free Your Creative Spirit and Find Your Great Ideas." Jordan has been affiliated with TEC for six years and has presented to more than 100 TEC groups.

Wally Bock

In 1983, when most folks hadn't heard of the 'net, Wally Bock was doing business there. He's been interviewed about his own experience and his original research into business uses of net/web technology by The Wall Street Journal, CNBC, CNN, Newsweek, The New York Times and others. His book, "Cyberpower for Business," was chosen by Inc. Technology as "a book every CEO should own," and James Barkdale called his book, Net Income, "an operating manual for producing results." He also publishes several newsletters, including Briefing Memo (www.bockinfo.com/bm.htm) and the free Monday Memo (www.bockinfo.com/mm.htm). Wally works with a limited number of businesses on a consulting basis and speaks regularly to audiences in North America and elsewhere.

Howard Coleman

Howard Coleman is founder and CEO of Electronic Marketing Pty Ltd, a company which develops profitable Internet strategies and solutions for business clients. Howard is also chairman of Webprofit.com.au-a "virtual organization" that analyzes business Web sites and recommends changes to deliver bottom line profits. He chairs two companies involved in Internet strategy and two Internet start-ups. A regular speaker at conferences on the Internet and with companies in Australia and overseas, Howard works with a number of companies in Australia and overseas, assisting them to develop an appropriate Internet strategy for their business. He has spoken on "Profiting from the Internet NOW" and "Building and Maintaining an Internet Competitive Edge" to over 900 TEC members in Australia and the United Kingdom. He has been affiliated with TEC for six years.

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