If you think because you’ve got email and
a website you’re doing e-business Ñ think again. You’re only in first gear according to the experts who say e-business is revving up into its second phase.
The first phase was characterised by website, email, the start of business transaction, and was mainly in the business to consumer environment, according to Sydney based International Data Corporation analyst, Merv Langby, who visited New Zealand recently talking to Fujitsu partners.
“The process was relatively limited. People initiated the transaction but in more cases than not, they needed to go offline to complete the transaction.”
While banks and large organisations have been using electronic processes such as EDI for the last few decades, what makes e-business compelling today, is the range of applications that mean any business can adopt it.
In fact, goes the chorus, if you don’t start connecting your business with your partners and/or your customers, you won’t survive.
So phase two is characterised by the move into the business to business environment, which is far more complex and demanding, says Langby.
The characteristics of new e-merging businesses are those which aggressively link to their customers, suppliers and business partners.
They do this through the Internet using
a) websites to handle sales transactions and provide customer service;
b) intranets and enterprise data portals to link employees and give them more access to data;
c) extranets Ñ one of the fastest growing segments of the Internet Ñ which allow information to flow to and from business partners. Through this kind of electronic supply chain, companies can reduce inventory costs by shortening the time it takes customers to order and receive products.
The labels associated with these processes are becoming common-place; e-procurement, ERP systems, supply chain management, voice technology, call centres, customer relations management, data and workflow management.
Outsourcing with e-Partners
The key change to the e-business model is the move towards partnering with specialists in information management.
“Whereas in the past people thought they could do most of the IT themselves, they’ll realise that running systems isn’t their core activity, and they’ll look for external sources of help.”
These partners will have wide range of skills. “They won’t just have IT knowledge, equally important will be deep understanding of business processes, and strategic thinking.
“Business process knowledge is much greater in this business to business environment than it ever was in the business to consumer environment because you’ve got more complex distribution, procurement and customer relationship management.
“Business will be more dynamically interactive than before Ñ these aspects are in their embryonic phase, but we will continue to get refinements of these solutions.
Linking up electronically also raises the question of how open and transparent an organisation might become.
Bringing customers and suppliers inside the organisation is vital decision, says Prashanta Mukherjee, principal e-business IBM NZ.
“It’s important to make them visible inside the supply chain, and we’ve taken our suppliers inside the organisation and given them visibility to our supply chain, and our R&D.
This requires fundamental change of thinking, he says. “You have to ask yourself Ñ are you prepared to let your business partners see the status of orders and accounts unassisted. And that requires certain degree of squeakiness.
“We’ve found some of our challenges under this transformation have been those transparency aspects, getting business units to agree that you will become transparent Ñ that’s harder than putting systems in place.
Putting systems in place is bit like mathematics he believes. “Put the right amount of skills into it and you can do the systems. But transparency requires fundamental shift in thinking.”
Cannibalise or get eaten
An issue for many large brick and mortar businesses is losing their traditional business once they become web enabled. In other words, cannibalisation.
“They’re worried if they open new channel which is easier to use, open 24 hours day, they’ll get fewer people calling into the physical address if they can get the same service on the net. There are arguments that using the net to deliver new and innovative services might cannibalise your existing services and products.
“But the other view is that we’re in state of business where you have choice, and that choice is either cannibalise or get eaten.
“So you can either have controlled cannibalisation or wait and do nothing. Then, sooner or later you’ll get ?Amazoned’ Ñ there’ll be an Amazon in your industry you don’t know about Ñ and it will emerge!”
So the key is to transform. Transform not only your systems, but your behaviour, and what you share and what you don’t share.
Billboard in the forest
A lot of people believe the web equals everything,says Mukherjee. “They put up site believing the whole world will flock to it.”
He describes website as billboard in the forest. “A billboard in the forest where everybody’s looking at the treetop level, but your billboard is below that level. You have to actively try and drive people into your online presence and keep them there and keep them coming back. You have to think of it as business and not as an IT project. What’s happened is people have built websites because someone said they’ll get value or business from it and they haven’t.
“And they didn’t carry out the process transformation needed inside, they didn’t look at how they would drive customers to the site. So their first project was bit of disappointment.”
New Zealand has lot of small businesses who supply to large businesses, and the cost of linking up is real concern.
If large businesses want to transform their supply chain from an e-business perspective they’ll have to figure out how to enable their smaller business partners to do that, Mukherjee says.
“General Electric, used ?stick’ policy in their first phase of their business to business e-commerce Ñ pre 1997.
“They said to their suppliers ?you can’t do business with us if you can’t access us online’. That drove number of their suppliers to them, but not all. Many said they were unable to do so. GE persisted for about year, then they went on ?carrot’ policy, and went into partnerships that enabled suppliers to access them. The take up went through the roof.”
IBM adopted similar thing with system called FOX, short for forms exchange.
“We found large number of suppliers couldn’t do EDI. So we built an application service provision called FOX whereby anyone with web browser can receive orders from us, fulfil them and request for payment.”
This means the smallest business in NZ can participate in their supply chain.
“We charge them transaction fee to use that facility, and they’re happy to do that. That’s because they can deal with their other customers using that service.
“So we’ve not only enabled them to do business with us, but we’ve also given them capability to do e-business with other customers Ñ that’s why they’re happy to pay the transaction charges.”
Mukherjee sees web enablement on four levels; the front, middle one, middle two and the back.
The front includes things like graphics and presentation, which take up around 10 percent of time and budget.
The back end, covers things like changes to existing systems, and should take up 20 percent. Middle one and middle two are the areas where the innovation is taking place.
The biggest new investment will be in the middle; for infrastructure and for new types of applications such as portals.
“You’ll need tools to g