In last month's article, we explored two concepts about e-business that are often overlooked: (1) Successful Web sites can perform cost-effective functions besides electronic order entry, and (2) there are alternatives to a wholesaler buying software and then hosting its own Web site. This month we'll outline an effective e-business strategy.
An e-business site is not a cure-all for every distributor's problems. To thrive in the face of competitors who will exploit e-business, some wholesalers will have to structurally change the way they do business, then center the new business around their new e-business capabilities. Here are some suggested steps to developing an e-business strategy:
1. Know your markets and products. Understand your current customers as well as the products and services they use. Why do they buy from you? What e-business functions could strengthen your relationship with them? What types of customers are the most profitable, and which products and services are the most profitable? Which e-business functions could increase profitability? Besides e-business, what changes in customers, products or services are likely to occur in the future? Which e-business functions do the most profitable customers want now, and which might be beneficial for them in the future? Which functions might other types of customers want or benefit from?
2. Consider new types of customers, markets and products. In particular, what new types of customers, products or services might be added to the business as a result of e-commerce functions? How much additional revenue might be generated from each new type of customer, product and service? Over time, could the new customers, products and services replace the current ones?
3. Look at e-business as a driving force. Aside from the e-business functions identified in steps 1 and 2, which other e-business functions might attract new customers? Which functions might help streamline operations? Which would streamline purchases and other partner interactions?
4. Look beyond your preliminary strategy. Based on steps 1, 2 and 3, identify e-business functions that: (a) would produce the largest and fastest benefits for customers; (b) would take longer to produce benefits or produce smaller benefits; and (c) could be added to help you as well as your customers.
5. Evaluate the adequacy of the current business system. For each of the three groups of e-business functions identified in step 4, determine if your company's current business system is adequate. If it is not adequate for two or three of these groups, it probably has to be replaced.
6. Analyze the financial aspects. The three groups of e-business functions now need to be examined individually and cumulatively. Start by adding the longer-term, smaller functions to the larger, faster ones, and then add any functions that help you. For each group and combination of functions, determine where the site might reside and which kind of e-business software to use. If you're not absolutely sure about the site and the software type, select two or three options for further analysis. Even if you have to replace your current business system to accommodate any form of e-commerce, continue examining the various groups in case the final strategy involves a separate computer or outsourcing.
For all the e-business functions that you identify, examine the method of site hosting and the kind of e-business software to see if they make sense for you as you grow. For example, it usually doesn't make sense to start with an in-house site for the larger, faster e-business functions and then outsource it when the other groups of functions are added. It's a good idea to keep a few options open.
For all the functions that you wish to accomplish, estimate the required investment and recurring costs. If more than one site or software type is being examined, consider the cost for each option. Then estimate the revenue likely to be added, as well as any reduction in operating cost.
Finally, calculate a five-year profit or loss and return on investment for each group and combination of functions as well as site and software options. But before concluding that the best numbers indicate the best strategy, check that it makes business sense and is not too risky. Adjusting for business sense and risk could mean eliminating some e-business functions that don't fit in with the company's strategy.
7. Identify changes in business processes. Determine if a change not related to your computer system is necessary. For example, you might have to change the way the warehouse is organized. For each change in business process, note the corresponding e-business function.
8. Identify training needs. Determine which employees would need training either in e-business functions or new business processes. Make such education part of the strategy.
9. If you build it and they can't find it, they will not come. Integral to the e-business strategy is a marketing plan. Of course, the specifics of the plan depend on the e-business functions and the new business processes. Plan to promote the site and its benefits for many months, if not years; it can take a while to build any volume of traffic. If the e-business strategy involves new types of customers, new methods of marketing may be needed.
10. Complete the strategy. Based on your decisions on investment, business processes, training and marketing, determine where the site will reside. A billboard type of site could be permanently outsourced, while one involving heavily customized information for each customer eventually might have to use a custom-built site on an in-house computer.
11. Select a designer, a builder and software. Guidelines for making these decisions could fill an article by itself, but here are a few general pointers. If you're considering tool kit or packaged application software, check with companies already using the software. Determine if a package contains the needed e-business functions or if a tool kit can create the needed functions. View sites using the software in question. If possible, actually use the sites. And always evaluate the sites as if you were a customer or prospect.