The statistics on e-commerce are stunning, and there can no longer be much doubt that the Internet represents huge and largely untapped potential for both business-to-business and business-to-consumer sales. But too many companies are jumping on the e-commerce bandwagon without doing the necessary groundwork to ensure that the systems they implement work in harmony with their existing business and technology processes.
Cambridge, Mass.-based Forrester Research predicts that business-to-business e-commerce sales will soar from $43 billion in 1998 to $1 trillion by 2003. Consumer adoption of e-commerce also continues to accelerate, with 7 million Internet users having made their first online purchases in 1999. With more than 17 million households shopping online by year-end, Forrester estimated that U.S. online retail sales for 1999 would reach $20.2 billion. By 2004, Forrester predicts that a new type of retailer the post-Web retailer will emerge to serve the 49 million U.S. households that will spend more than $184 billion online for a variety of goods.
Buying and selling involves many transactions marketing, sales, customer support that are interactions between your company and your network of trading partners. When interactive services work well, they lead to lower costs, better customer information, more accurate marketing plans and improved revenues. If interactive services don't work well, they impede customer service and other business systems, leading to lost sales and higher costs.
Companies should consider three issues when implementing interactive technology, says Gene Bounds, executive vice president of Robbins-Gioia, an Alexandria, Va., program and project management consulting firm:
- Workforce readiness and culture. The new technology will fail miserably if the workforce isn't adequately trained to use it or doesn't accept it.
- Process. How will the technology affect business processes? If a company adds the ability for its customers to buy over the Internet, will this cannibalize other sales channels or complement them?
- The technology. Does it integrate with legacy systems? Is it scalable enough to grow with the business, or will the company need to buy a new system in six months?
The workforce issue is often overlooked, Bounds says. A company is more apt to get employee acceptance if it alerts employees and managers to impending change and explains it adequately. If the technology will change the way an employee works or if it will replace much of the work he does, the employee should be taught to work elsewhere in the company.
To get staff buy-in, Bounds recommends finding employees and managers who are enthusiastic about the technology and making them technology champions who will work to gain their peers' acceptance.
Before implementation, Bounds recommends considering how the new technology will affect the business process as well as the process of the legacy technology. That means mapping the current and planned technology process completely to see what business and technology systems they touch and how those systems will be affected by the change.
"The technology itself is the simple part," says Greg stack, executive vice president for Chicago-based eLoyalty, a business consulting and systems integration company. "Easier access to a bad process doesn't help you. As you add interactive capability, you need to look at making the process more customer-centric."
He foresees interactive services quickly becoming a commodity, as companies large and small rush to offer them. The differentiating factor will be customer service.
strategic Technology Planning
The first step to interactivity is to focus internally. Develop a technology plan, Bounds says. The technology plan includes a position statement, strategic planning assumptions, a mission statement, and short- and long-range goals and objectives, much like those found in a strategic business plan, according to Brent Carstensen, manager with RSM McGladrey, a business consulting firm based in Davenport, Iowa.
A technology plan should be integrated with the business plan because the success of one depends largely on the success of the other. Executives need to decide what
benefits they want from the technology. For example, while some interactive sites have full e-commerce capabilities, others are simply for e-mail. Company executives also need to determine what they have and what they need, Carstensen said. New technology might not be necessary. In many cases, better training could produce more use of current technology, according to Jerry Houston, president of Lansing, Ill.-based Houston Associates, a training development firm. Some companies aren't taking advantage of their current system's capabilities.
The company's technology plan should include an overall picture of what is to be accomplished and why, with specific priorities. Management needs to be committed to the technology plan, or dollars won't be available for planned investments. Other priorities could prevent proper resources from being available to implement the technology. Stack recommends finding a company executive to sponsor any new technology process. Without management's financial support, the technology won't fulfill the company's expectations.
Don't look at technology simply as a cost of doing business. Instead, look at it as being a strategic investment that can provide a competitive advantage with intangible and tangible benefits alike, Carstensen says.
With technology changing rapidly, it's important that a plan be fluid enough to change with it. Short-term plans should cover three to six months, enabling a company to react to changing technology and market conditions. Long-term technology plans look ahead three to five years. For example, most long-term plans in 1993 didn't consider the Internet at all. Two years later, e-commerce was still in its embryonic stages, but the World Wide Web should have at least been discussed when companies reworked their short-term technology plans. Even if a Web site wasn't in a company's plans for the next six months, it should have been part of a rewritten long-term plan, Carstensen says.
Other strategic Planning Considerations
Each department should have input about current and long-term technology needs. Examine how well each existing and proposed system fits the company's current and future plans from a strategic view.
Vendors are usually knowledgeable about their specific technologies but might not be able to detail how well it would incorporate into a company's existing systems. Outside consultants might be best able to provide an independent evaluation of different technology alternatives. While large companies may have well-versed technology staffs, most small and mid-size business don't have such resources.
Although developing a technology plan takes time, effort and money to be done properly, it consumes fewer resources in the long run and is much more efficient than trying to operate without one.
The E-commerce Difference
The technology plan should include an integrated e-business solution that connects Web, commerce and payment systems, says Andrew Schiller, managing director of Management Information Consulting, Arlington, Va.
More efficiency, including reduced expenses and higher revenues per full-time employee, is one of the major reasons companies are becoming interactive, particularly in terms of e-commerce. "It's about business, not just technology," Schiller says. "Companies need to transform the way they do business. They need to be able to support this operation with prospect profiles and collaboration between different departments."
"Through 2003, 50 percent of low value-added sales function and personnel will be replaced by lower cost-of-sale interfaces such as the Internet."
Most businesses already have sales, applications and data systems in place. The key is ensuring that they can communicate and interface with e-commerce applications and track customer information. In building a customer database, companies first need to determine where customer information is stored within the company's existing systems. Customer information should include demographics and credit information to help a company determine which customers are most profitable and offer them a higher level of customer service. To reduce costs by as much as 30 to 60 percent, this information should be integrated before an e-commerce site is launched.
Back-end systems are usually too expensive to replace, so middleware should convert the front-end processing to conform to the formats already used by the back-end system, says Laura Crandon, director of e-commerce products for USinternetworking, Annapolis, Md.
Typical e-commerce equipment includes: A Web server, which provides Internet access, the http engine and the operating platform. At one time these systems supported either Windows NT or UNIX, but systems that support both platforms are becoming more commonplace.
A commerce server, which includes a secure application engine, shopping cart, product catalog, customer registration and ordering support. The commerce server needs to be easy to use, yet include sufficient security protocols. It also needs to connect with the company's inventory system so that supply keeps up with demand.
A payment server, which includes a secure electronic transaction (SET) capability for accepting credit card orders or electronic data interchange (EDI) or XML capabilities for accepting business-to-business transactions. Once a company goes on the Internet, it can get orders from around the world, so the payment server also needs to handle currency conversions.
A database server, which must communicate between different database engines for orders, shipping, pricing and services so that there aren't separate silos of disparate information.
An ERP server, which Schiller refers to as a company's mission-critical system. The ERP contains information about a company's customers, products and historical data and is the key to delivering high-quality customer service.
"Your site is the customer purchasing experience on the Internet," Schiller says. "It should duplicate your company's image, culture and message." However, the virtual storefront is not always similar to a company's "brick-and-mortar" operation. For example, furniture retailer Ethan Allen uses its Web site to boost sales and traffic at its traditional stores. Until the e-commerce functionality was launched in the fall, Ethan Allen used the site to encourage shoppers to browse before visiting a traditional store to make a purchase.
The online ordering system feeds sales information to the company's compensation department, so that sales and bonuses can be computed per store. Each Internet sale is allocated to the store closest to the shipping destination, so salespeople earn bonuses on Internet sales as well as in-store sales. This system encourages use of the Internet channel and prevents salespeople from opposing online sales.
E-commerce is not a case of "build it and they will come." Companies need to inform current and potential customers that interactive services are available, Schiller says. Whereas traditional marketing is often intrusive, effective marketing via interactive channels needs to be permissive. The company needs the customer's permission to market to him. Mass e-mailing, called spam, doesn't work. Banner ads, flashing links and other forms of interruption marketing are weakening in effectiveness as customer expectations grow.
"Determine what the customer will give you permission to do," Schiller advises. "There is huge value in permission relationships." Several airlines have been effective with this permission marketing. They invite customers to sign up for Internet specials, which are sent by e-mail. Southwest Airlines gave an initial boost to its Web site by offering double frequent flier miles for online ticket purchases. Other companies also offer Internet-only specials.
"With technology changing rapidly, it's important that a plan be fluid enough to change with it."
Managers of sales departments have challenges to overcome as their companies seek to become interactive, according to Robert Desisto, analyst for the GartnerGroup, Cambridge, Mass. The first is to determine the effect of interactivity on the sales department.
Lower-valued selling functions such as banking transactions should be transitioned to the Internet, while salespeople should focus on higher-valued sales function estate planning, for example.
"Lower-valued sales functions have two characteristics," Desisto says. "It is possible to execute them from the Web, and the customer would prefer to perform them without a salesperson's assistance. Organizations that try to transition functions to the Internet and do not meet both characteristics cause customer dissatisfaction.
"Through 2003, 50 percent of low value-added sales function and personnel will be replaced by lower cost-of-sale interfaces such as the Internet. Regardless of user type, selling organizations must begin to evaluate which functions should be transitioned to a low-cost Internet channel while identifying high-valued selling functions that should continue to be performed via traditional sales channels."
Call Center Integration
When adding interactive services, companies need to make sure their call centers or on-site customer service representatives can handle increased call volume. The calls go beyond simple ordering to include questions about such things as hardware, software and security of online purchases. By including a frequently asked questions segment on the Web site, a company can answer many of those questions without affecting the call center.
Be sure that representatives answering the phone also have access to the Web site, stack advises. Otherwise, they can't help customers who are experiencing difficulty negotiating the site. Other consultants point out that communicating via e-mail is a different skill than communicating via the telephone. The customer service representative who can speak well may not be able to deliver a message as effectively through e-mail or vice versa, so some companies are separating call and e-mail duties. Crandon also recommends using software programs that route e-mail depending on keywords in the subject line or in the text.
As interactivity is implemented, calls to the interaction center will go up, so companies need to be able to handle calls around the clock. If managed correctly, the total calls will spike only initially, according to stack. He recommends making e-mail and the Web site as simple as possible to use to minimize any increase in calls. The total number of customer contacts for the combined channels will increase 7 to 10 percent, stack adds. The increased number of customer interactions should result in increased sales as well. In fact, increased sales, improved customer service and reduced expenses make up the siren's song that is enticing companies to offer interactive services.