A road map to e-Business success

The technology within the Internet will help streamline the processes and costs of moving product. But how can you integrate this opportunity, while avoiding the failures that are all around us? -- Industrial Distribution, 4/1/2001

Other articles from this Distribution Technology Report:
Profile: Business savvy at Updike Supply
Viewpoint: Capitalizing on exceptions
How search engines can help
  

By Bill Dowding, Contributing Editor

Strategy over technology
"E-nvy"
From strategy to execution
Key questions to evaluate
Building blocks of your firm's e-commerce model

Speed.

For many companies, this simple word conveys the essence of their business strategy. It characterizes the daily changes affecting their operations, as well as the requirements that customers and suppliers are demanding.

However, as the cliché says, “Speed kills.” Because, in addition to speed, companies also need an optimal combination of strategy, agility, visibility, and intelligence.

In today’s accelerated business environment, having a coherent strategy guiding the enterprise is more important than ever. Without it, the velocity – and complexity — of business challenges makes it extremely difficult — even for the most adept management teams—to successfully respond to opportunities and threats. Unfortunately, this high-velocity environment also makes it all the more difficult for business-to-business organizations to create an effective and meaningful strategy. Perhaps the best example of this convergence of challenges is when a B2B company initiates its e-commerce business model.

It’s not the technology; It’s the strategy

The ability of an individual firm to succeed in implementing a successful e-business initiative correlates directly to that firm’s management team’s ability to first develop, and articulate its corporate strategy — and then integrate a specific e-business model that supports that strategy. Most firms today, whether a “pure play” or an asset-based “brick” organization, are not reaching their e-business objectives for one of two reasons.

In the first group, the classic “e-organizations” have neglected the fundamental need to comprehensively develop their business strategy. They have instead moved boldly forward into the launch of a business model without properly establishing the “back-end” support processes. They created a demand in the marketplace that their organization cannot hope to fill. They skipped the process design portion of their planning, and instead concentrated on developing the technology on their Web sites.

The second group has generally approached the e-business marketplace with a great deal of caution. Some have adopted a “Let’s wait and see if this is a fad” approach. Others meanwhile have resisted e-business because…"It might upset our traditional business channels.” Most of these companies have dabbled with catalog sites, but have done little in the way of true Internet commerce.



Management must first develop and articlulate its corporate strategy, and then integrate a specific e-business model that supports that strategy.

“E-nvy”

These two groups have “e-nvy.” Both have part of the recipe for a successful e-business initiative. What they lack is the piece the other has already built. The structure that each type of company requires is not unattainable. It does however take a careful and structured approach to develop and launch.

The question is how can your organization leverage the opportunities e-commerce can bring. The reality is that e-commerce is nothing more than a business model for optimizing and extending the business processes your firm employs to achieve its strategy. In fact, as for the technology itself, there is very little new or conceptually challenging about the Internet.

It’s not the product (anymore) — It’s the customer

The Internet has amplified the shift of power to the customer. Today the customer has timely and immediate access to information regarding just about any subject including your products and services. S/he can not only compare attributes of competing products and services, but can make direct contact with the individual and firms with whom s/he wishes to do business.

Employing the Internet into your organization is a high-risk/ high-reward proposition.

The Internet is all about information. Except for certain electronic “softgoods” (such as software, MP3 songs, images, and data services), the Internet cannot and will not replace the supply chain. Rather, the technology within the Internet will help streamline the processes and costs of moving those products. It will bring greater efficiency to the supply chain. Those organizations that properly “define and align” their e-business models with their corporate strategies and business processes will be the winners.

So the question each management team should be asking itself is, “How do we integrate this opportunity, while avoiding the failures that have passed before us?”

Strategy — Process — Technology — Execution

The Internet’s high-profile impact has captured – and deflected — the attention of many a management team. Otherwise very successful organizations have either made spectacular gaffes in launching e-business initiatives, or have become paralyzed by the daunting task of e-business integration.

In fact, however, the process of evaluating and integrating an e-business initiative should follow the firm’s pre-established methodology. For the Internet, the question is not so much “Should we…?” but rather… “How do we…?”. And the how is not initially the mechanics of implementation, but rather the strategic vision of integration. Again however, note the emphasis on process.

Employing the Internet into your organization is a high-risk/high-reward proposition. It can be a weapon to capture tremendous market share (i.e. Amazon.com), or a company killer (i.e. eToys.com). It must be approached with a disciplined, structured process. There is no cookie-cutter answer a consultant can give you. (If a consultant says he can, run as fast as you can in the other direction.)

However, you do need a methodology to approach your unique set of problems and opportunities. Seek out those with a methodology to assist you.

Evaluate how an e-business strategy can facilitate your relationships with your customers, suppliers, and their suppliers. To do so, you need to address the following issues/questions:

• How does e-business integrate into our corporate/divisional strategy?
• Is the return-on-investment feasible — or is it pie-in-the-sky?
• How will e-business work on the sell side of our B2B model?
• How will e-business work on the buy side of our B2B model?
• Are we building a sustainable competitive advantage – or simply mimicking our competitors?
• What impact will a successful e-business initiative have on all facets of our organization and extended supply chain?

A successful e-business model and strategy can take various forms in different organizations. It may include sell-side strategies – such as one-to-one marketing, build-to-order, customer self-service, or new distribution channels. It could encompass buy-side initiatives including market exchanges, supplier direct purchasing, or commodity auctions.

As depicted in the above table, the foundation of this effectiveness is the organization’s strategy. Building upon the strategy is the development of the e-commerce business model, technology, and finally organizational effectiveness.

Once you can articulate your strategy, and how your e-business model will integrate to achieve supply chain effectiveness, you need to (re-establish your business processes to support that model.

This design effort is just as important as the strategy phase. If you do not, or can not develop and implement the business process capable of supporting your e-business model, you will fail to achieve the success needed to gain a positive return on your investment.

There is no MBA textbook answer to process design. Your organization deals with its suppliers and customers in unique ways. Although there are many great ideas that you may gather from benchmarking other companies in other industries, make sure that you “adopt and adapt” the right procedures and processes into your company, enabling you to interact with partners the way you wish. Above all, insure that those who must execute it for you, design the process. Do not let a consultant supply the answer…just the methodology.

Only now are you ready to address technology…technology that makes sense. It should be in support of your newly designed business model and processes. The technology should be an information enabler. Whether it is Internet-, Intranet-, or Extranet-based, the only purpose should be to streamline processes, reduce cost, and increase the flow of information throughout the supply chain. Doug Levin, executive VP of Prophet 21 says it well. “The market has become a digital marketplace. We are supplying the conduit by which trading partners can mutually succeed. We are the infomediaries in the marketplace.”

Don’t ever forget that technology doesn’t create a process or create an advantage. Rather, it amplifies what processes and advantages you currently have or are designing. A process that is a 3, can become a 30 if supported by the right technology. But that same technology applied to a process that is a –2, can result in a process of –20. Address your process issues before applying the technology.

Finally, it is execution. Speed is important, but not at the expense of sound business judgement. The landscape is littered with dot.coms that were killed at “Internet-speed.” Be wary of promises from process or software consultants that include unreasonable implementation timeframes. Insure that the integration of your business model follows a sound timetable, one that leads to a ROI within an acceptable payback period. Insure that you have tested your processes and that they do indeed support your e-business model, before launching your initiatives.

The Internet economy is here and will continue to evolve and impact your organization and industry like few mega-trends ever have. By integrating a sound, disciplined e-business model into your organization through a structured methodology, you have the probability of harnessing this opportunity for the greater success of your organization.


Bill Dowding is the Principal of The Welfleet Group, a business consulting firm specializing in Business Strategy Development and Implementation, as well as Business Process Re-Design efforts.
He can be reached at 413-596-0048 or through the firm’s Web site at www.Welfleet.com.