The Internet Influence is bigger than you think.
But despite all this ‘snake oil’ many managers insist that ‘we won’t be selling online’ so we don’t need an Ecommerce strategy, or at least for some time until Ireland goes online, so we should ignore all this hype. What many managers are missing is that customers often go online to do their information searching and then go offline to do their buying. In a study by Ernst & Young estimated that around 64% of online consumers would research products online but buy offline. In another more specific study estimates of the percent of consumers looking for mortgages influenced by the web vary from 10-15% today to 50-70% by 2005. Unfortunately, in the Marketspace “the competitor is just a click away” according to Conor o’Toole, Managing Director, Sorrento Business Consulting Ltd. Customer eyeballs do matter. But the response to this is ok! So we need to put our product brochures online! Well, that’s not exactly the full story.
Key Insight – The Online Business Cycle is Customer Centric.
Business is never that simple, but the major shift coming in the emerging information economy will be to place the customer in the centre of the business cycle. One American banker put it well recently when he said ‘ Customers don’t care about our stuff, they care about their stuff’. The Internet will be a revolution according to him and the ‘customer will be in charge’. This is “the age of interactive marketing and the customer will be in the driving seat” according to Eoin Grimes, Internet channel manager at ICS building society.
This Marketspace will be customer centric, key activities and interactions will revolve around the customer, not the company. We will need to move from producer land, which is flat, and thinks sequentially in terms business of activities such as Design, Make, Sell and Service, to consumer land.
Therefore rigorous user centred design is vital to ensure that the customer experience is optimised online. This is often called human factors engineering. This is seriously an under invested area and many companies would do well to subject their online efforts to a strenuous review from the customer’s perspective. You have “got to put yourself on the customers side of the screen” according to Eddie Murphy, Managing Director of Labyrinth, a leading Irish Internet company.
Technology is the problem.
In many ways technology is the problem. Just because you can do something technically does not mean that you should! But we need to get to the heart of the business issues. Mary Cronin suggests that ‘the Internet is a technology in search of a strategy.’ I couldn’t agree more. But “ building commerce transaction sites is a complex business, particularly if you have to link to existing business systems” according to Frank Boyle, managing director of Storm Technology. But “many customers don’t spend enough time in the planning or analysis stage”.
One interesting example of successful business model migration is Edmund’s , an information provider of new car prices and reviews. They were the first site on the Internet to provide this information to customers at no cost and have been transformed by moving to the Internet. They used the net to fundamentally change their business model, giving their product away free online, when previously they charged for it in book form in the marketplace, and changed their income model from book buying consumers to a few online marketing partners including AutoByTel, GEICO and J.C.Whitney. Encyclopaedia Britannica in contrast, who were very successful for over 100 years in the marketplace, did not make out too well in the Marketspace.
Discovery driven action planning.
After all is said and done about Ecommerce there is usually more said than actually done. So where do we begin? What we are trying to get a sense of is how much the Internet will impact our business and where should we start our strategic initiatives?
This Discovery process, should be followed later by more detailed Design, Development and Delivery phases, which is illustrated above.
Let’s consider building three scenarios.
- The do nothing scenario
- The opportunity search
- The doomsday competitor
The ‘Do Nothing’ scenario.
What happens if we do nothing? This is well worth investigating. But to get a handle on this I suggest you look deeply into two key areas. The first area for consideration is your customers or business partner’s (see eSelling below). What are your best and most profitable customers doing? Spend some time with them discussing their plans and use of the Internet. Secondly look at your competition. Two groups are important here, your existing marketplace competitors and second your new Marketspace competitors. However it is important to remember that you are playing in a global marketspace. So the competitors you should review are not just Irish ones but the ‘best in class’ in Internet terms. For example if you are in banking it may be more appropriate to compare yourself with Citibank or Wells Fargo than just looking at your nearest physical competitor. A recent study comparing online banking services was conducted as part of an ongoing project by students in the telecommunications and e-commerce program at Vanderbilt University's Owen Graduate School of Management. The study is available free of charge at SupportZone.com (http://www.supportzone.com), which is an online resource designed to help e-businesses improve the responsiveness of their online customer interactions.
How are your competitors using the Internet to reach the online nation? What new business models are emerging, probably in California, which might rewrite the business rules of your business?
The Opportunity search
Look at the online business cycle for your business. Where are the opportunities to reduce cost, improve efficiency, find more customers or personalise your products for your customers or discover new profit streams?
Take a closer look at all the activities in your commerce chain such as:
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eMarketing: How can we exploit the technology to help our customers solve their problems and thus build stronger relationships? This will mean taking a customer view of the problems they want solved or the information they are seeking. For example Bank of Ireland has a very innovative Savings & Investment section on its web site to help customers discover the right savings and investment products. Potential customers can then locate an advisor, email them or book a call at the desired customers time. This resource can be found at http://www.boi.ie/save-invest/index.html.
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eSelling: How big is our online selling marketspace? Should we sell directly to customers or enable our channel partners to sell online? The objective is to build up important customer information? Who else is selling our products online today? Do we still want these new e-tailers to be doing this or not? Could we launch affiliate programs and give our channel revenue recognition online or re-intermediate our channel in the marketspace? Look at www.imediation.com a company providing a solution for building largescale affiliate networks.
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eService: How could we use this new communications medium to give our customer support 24 hours a day and seven days a week? E-mail is one effective medium to address this customer service interaction. Egghead.com, has implemented the Brightware intelligent email product to provide complete email customer service for the more than 7 million shoppers that visit its site each month. This boosts customer satisfaction and lower costs by automatically composing and answering 40% of incoming customer emails and doubling staff productivity by routing the remaining 60% to appropriate employees with suggested replies for rapid review.
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eBuying. The more effectively a company buys the better the bottom line. A recent two-month study by Grainger Consulting Services, a division of W.W. Grainger, Incconfirms that e-commerce procurement is a significant benefit to both buyer and seller. The study shows that Buyers who made investments to acquire and implement e-procurement methods averaged a return on their investment of between 245 and 400 percent, while sellers showed gains of 10 to 15 percent. Sellers did, however, receive the additional average benefit of a 300 percent increase in sales.
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eFeedback: How can we get the customer feedback on our products and services into the hands of the people who are designing them? We can often dramatically improve our existing products or even create new ones. Customer feedback is not a new idea, it’s just that the net can get this vital information to the people who can do something about it as in the Egghead case above. National Semiconductor “has done an outstanding job of connecting its Web site to the rest of its business. Leads from the Web site flow directly into the opportunity management system. Customers' e-mails are answered by any of 8,000 employees” according to Patricia Seybold. (More on www.customers.com)
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eBusiness: Explore how we might create entirely new profit pools by tapping into the Marketspace and devising offers which regenerate our income streams into the future. This is an important management task and often gets neglected in the everyday rush of business. Just look at the stream of IPO’s rushing to create new value in the Marketspace. Have a look as www.witcapital.com who started in brewing and are now raising capital in the marketspace for tomorrow’s aspiring information corporations. Think in terms of ‘Option creation’ as Larry Downes and Chunka Mui suggest in ‘Unleashing the Killer App’. This book is also available online at http://www.killer-apps.com
Build ‘the doomsday’ competitor.
Let’s have some real fun. Imagine that you were leaving your current business because you were really annoyed at how you were treated. You want to construct the nightmare competitor to wipe out your existing business and make them pay! How would you use the Internet to Amazon them? What activities would you drop, what new ones would you invent, how would you grab customers in the online environment? For example Eagle Star Direct put their offer on the Internet and offered the customer a 15% discount if they did all their business online. In this case both the customer and the company were winners, with lower prices and lower operating costs.
Of all the options cited above I like this the most. Present the results to the senior management and knock their socks off. A famous strategist Sun Tsu once wrote ‘You should first ensure your own invulnerability’. The competitor from hell is the output of this activity. Best do it before the competition does, and more than likely it will be a new entrant, rather than one of your existing competitors. So keep all your ‘options’ open.
One company has recently undergone a dramatic transformation in their business, from being a bricks based retailer to being totally bits based. Egghead.com is now a leading Internet-based discount retailer of computers, software, accessories, and peripheral devices. Egghead has completed an unprecedented year long transition becoming the first national retailer to move its entire business from bricks and mortar to the Internet. "Our performance for the year and in the fourth quarter demonstrates the emerging power of Web commerce," George Orban, Egghead.com chairman and CEO said. "It was absolutely the right decision. Our brand now is among the strongest on the Internet and our new business model is taking shape," Orban said. "We believe that the future of e-commerce is bright."
Conclusion and Next Steps
The digital economy is emerging, brawnpower will be displaced by brainpower and bits will displace bricks. In this Marketspace different companies will be impacted differently. (For a more complete discussion see Quinn & Sviokla below). But one thing is clear, managers must be able to think and act both in the marketplace and the marketspace.
It is important that we are prepared for this new landscape because both the rules and the game are changing. Gary Hamel has suggested that “somewhere out there is a bullet with your company’s name on it. Somewhere out there is a competitor, unborn and unknown, that will render your business model obsolete.” (Gary Hamel and Jeff Sampler, Fortune, Dec 7th, 1998). This article has identified how technology is redefining the marketplace, new virtual competitors are emerging, customer knowledge is poor and the best customers are going online.
A recent presentation in Dublin by Gartner researcher Alexander Drobik forecasted that ‘to year end 2001, over 70% of multinational enterprises will have failed to plan a coherent approach to eBusiness leading to a significant loss of competitiveness.” We need to discover where we can act, that is what our strategic degrees of action are and then to act in the action zone, before others do.
Internet strategy is a fundamentally discovery process. There are no right answers, but I hope this article has provided some useful guiding questions. The three scenarios of ‘Do Nothing’, ‘Opportunity Search’ and ‘Doomsday Competitor’ are devices to assist you map your route in the as yet undefined territory of the Marketspace. May the forces be with you.
Michael Quinn is an eStrategy consultant who specialises in Internet strategy discovery. He was formerly the Strategic Planning and Alliances Manager at Digital’s European Software business in Galway. He has worked with Professor John Sviokla of the Harvard Business School and has authored a HBS case study exploring Internet Strategy in the Banking Industry. He lectures widely on Ecommerce and provides board level Internet Strategy advice and briefings. He can be reached by e-mail at mfquinn@tinet.ie or on 086-814-9819. Michael also lectures on the Trinity Institutes
E-Commerce programme, more details of which can be obtained from 01-280-2984.
* Quinn, Michael; Sviokla, John J. Marketspace Strategy and the European Information Society
In: Klein, Stefan: EM - Electronic Auctions. EM - Electronic Markets, Vol. 7, No. 4, 12/97
http://www.electronicmarkets.com/netacademy/publications.nsf/all_pk/266