It’s more than home page or shop-
front. E-business is about integrating and streamlining your entire business – sales and marketing, purchasing and supply relationships, customer service, finance and HR management.
It means improving your internal and external processes and providing self-service capabilities that let people enter their own transactions cheaper, faster and more accurately. From such transformation you will get better efficiencies and operations, and 360 degree global view of your organisation.
But New Zealand is at least two years behind the United States and Europe in e-business implementation.
Consultants put the time lag here down to two things: loss of nerve after string of well-publicised e-commerce failures overseas, and fundamental misunderstanding of what e-business is all about. Deloitte Touche Tohmatsu partner Tom Donaldson says. “New Zealanders are early adopters of technology, but e-business involves deep-seated change to the way business is done.”
In recent report titled Manufacturing Deconstructed, US-based consultancy Forrester Research spelled out the future direction: “Five years down the road, today’s linear manufacturing value chains will [be] replaced by networks of manufacturing specialists that are all cooperating at Internet speed to deliver products.”
The research house recommends that global manufacturers focus on specialisation and networked assets, foreseeing that by 2005 transnationals will have tailored their operations to e-business manufacturing networks. By that date, Net-based trading is forecast to have risen from US$57 billion to US$6.8 trillion.
Arthur Andersen director John Hawkins says the very real benefits for business-to-business activities offered by digital markets and e-procurement have resulted in some companies putting huge effort into evaluating their options. In his view, the online world is easy to talk about, hard to get right.
e-Planning
Where to start
“Until now, the thinking has often been along the lines of ?let’s put up website and sell widgets’,” says Pricewaterhouse- Coopers e-business consultant Trent Fulcher. “First up, you need good e-business strategy, otherwise international competition will come in and wipe you out.”
The key is to understand that e-business is more than just technology upgrade. It is equally methodology upgrade. Fulcher goes further, saying he would like to see the ?e’ taken out of e-business, because “it is just how companies will work in the new economy”. He is frustrated at the way e-business often is the domain of the IS department, instead of being directed by the CEO and the board. Getting it right involves being systematic and thorough. Hawkins breaks the process into four components. First, analyse your business environment, then develop vision, identify the enablers (including organisational competencies, and current and emerging technologies) and, finally, formulate an action plan – roadmap – to achieve the vision.
Ernst & Young partner Susan Steedman asks similar questions to determine how well existing business and IT strategies align with e-business plans: Are you getting into e-business to protect your core business? Will it change the rules of your business? Will it change the game? In other words, is the process likely to result in new organisation? And, crucially, how far out do you want to be designing strategy? Steedman recommends taking strategy out no more than three years and implementing it incrementally.
“E-business is in its infancy, so you need shorter payback than with some past investments,” she says. “In the 1970s mainframes had five-year return. We advise quick implementation and short payback.” Deloitte’s Donaldson frames evaluation, in terms of an opportunity assessment followed by readiness audit. What is the object of the exercise: To reduce the cost of transactions; to increase the range of products; to widen the geographic market; to introduce 24-hour availability?
How would going direct to market affect existing sales and distribution channels? Will the move to website affect pricing structures in different countries? What security issues are raised by electronic connectedness? Will people be able to get into your other systems? Will customer details be protected? Will suppliers be able to access your inventory and take responsibility for Just-In-Time delivery?
In terms of organisational readiness, what are the technological requirements? Does robust systems platform exist on which to build e-business? Will the distribution system cope with the rapid delivery demanded by e-business? Most organisations, geared around office hours, will suddenly be exposed to 24-hour, seven-day business activity. (The process is not unlike connecting the plumbing system in an old house to mains pressure – suddenly, taps everywhere start springing leaks.)
Is the management team ready? Are there plans to outsource any activities? “Buying patterns, receptivity and responsiveness of clients – that should all be few clicks away for sales manager at any time.” Be hardnosed about what is happening. For example, ask whether it makes sense to put in an electronic storefront. Will it open up new opportunities, or just reinvent the current market?
Getting down to it
Project buy-in from senior management is essential, and Steedman emphasises education and training throughout the organisation to build an awareness of what is possible with the technology. She advocates nominating project sponsors – preferably senior people including, in bigger companies, the financial controller, the director of human resources, the marketing manager and division or department heads – once the project becomes tangible.
Often, it is advisable to pilot an e-business project with selected customers and suppliers 90 days or so before full implementation, then devote the remaining time to back end integration. Consultants also advise formulating an exit strategy before implementation. “The hardest part is not the technology,” says Arthur Andersen’s Hawkins. “It is everything that plugs into the technology.” Software for e-procurement may be bought off the shelf, he says. But then, suddenly, the company may find it needs to develop reliable system for updating information online. Worse, it may need to create an online catalogue from scratch. “Time to market is crucial element of e-business,” says Hawkins. “There is lot of advantage to being the only game in town.”
What it will cost
E-business is scalable. Small companies can go direct to supplier like Xtra if they only require web page and an electronic catalogue – though the caution about understanding the true nature of e-business remains. Suppliers may be forced to change when client corporate adopts e-business. In that case, the corporate may help suppliers through the process.
For small to medium companies, out-of-the-box software which handles inventory, accounting, website management and electronic ordering, can be bought for about $10,000. But bear in mind that developing an electronic channel may well put strains on distribution and require additional investment in re-engineering. E-business, above all, is about fulfilment.
Cost of not
Ultimately, however, the real cost of e-business is the cost of not embracing it.
New Zealand companies will benefit from gaining access to international markets – either horizontal markets such as the Australian CoreProcure.com, which consist of number of large corporations, or vertical ones such as buzzsaw.com, which are built around specific industry. Among the rewards of participation are aggregated spend among smaller companies to leverage price and staying in the loop as corporates shift online.
Business-to-business exchanges allow an enterprise to blanket the globe while using backbone of recognised commercial entities to do it. The bottom li
