There is more to e-commerce than building a Web site

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If you are like many organizations today, chances are you have been investigating the Internet as an alternative channel. The promise of low-cost, 24x7, self-service access for customers and supplier partners is extremely compelling. But as a member of the senior management team, ask yourself the tough questions, such as:

" How does e-commerce integrate into our corporate strategy?

" Is the return on investment feasible or pie-in-the-sky?

" How will e-commerce work for our B2B sales model?

" Are we building a sustainable competitive advantage, or simply mimicking our competition?

" What is the impact of a successful e-commerce initiative on all facets of our organization and supply chain?

If you arent sure that these issues merit the attention of your senior management team, review your latest quarterly report. If your firm is like most, youre making a substantial investment in information technology (IT), an investment that is growing every day. According to the Standish Group, 40 percent of a typical firms capital budget is now devoted to some form of IT investment, compared to less than 5 percent just 10 years earlier.

The Internet is changing your business and your competitors too. It is changing how your customers and prospects evaluate and choose the products and services they buy. Whats more, the key product differentiators that set your products and services apart are blurring as the Internet offers an unprecedented flow of information unheard of 5 years ago. So, if your customers want to do business on the Internet, how will your business respond?

For many, the answer has been to throw together a cross-functional team, with representatives from marketing, sales, customer support and IT. Bingo, youve got a Web site and youre an e-business. These sites typically offer brochures and information on the company, essentially establishing an online identity and presence.

More sophisticated companies have begun processing customer orders. Some have built "ordering intelligence" into their sites, helping customers choose the proper products and services for their needs. Using technically enabled product configurators, they perhaps can assist potential customers specify their own product solutions. Not surprisingly, these cross-functional teams report back that theyve been successful and have implemented their firms Internet presence.

But how do you define and measure success regarding your e-commerce efforts? Why are so many otherwise strong, successful, and profitable organizations not having the same success marketing through the Internet? Why are they failing to make a profit through a channel that in most cases was internally established based upon a promise of a lower cost of doing business?

The answer may lie in your strategy, and the integration of these new business models with that strategy. Companies that have rushed to the Web without a clearly defined strategy, or the ability to integrate an e-commerce initiative with the remainder of the firms strategies, simply have not enabled their organizations to do business in this brave new world. Further, they do not have a defined business process through which to orient themselves to this change. Without it, they will soon be out of business,  because there is a competitor out there, current or emerging, that will show them it can be done.

The strategy of doing business on the Internet
Developing and implementing strategic initiatives has always been difficult. In todays ever-changing markets, sound strategic decisions can seem downright elusive. Without the foundation of a well-developed strategy, any e-commerce effort is tenuous at best. This lesson, so clearly demonstrated by the "dot-bombs," is still being overlooked today. The same firm that performs due diligence before developing and launching a new product will bypass this same effort when launching an e-commerce initiative in the name of reacting at "Internet-speed." This must change for organizations to successfully integrate Internet initiatives.

The first questions your firm needs to ask itself are: What do we expect in establishing our e-commerce strategy? How will this e-commerce effort sustain our organization, our suppliers and our customers?

Specifically, how will your organization achieve competitive advantage in each of these six areas:

   Your value proposition to your end-customers;

   Your ability to improve its supply chain;

   Your ability to offer pre-eminent order fulfillment services 
   to your end-customers;

   Your ability to replace inventory with information;

   Your ability to become truly customer-centric; and,

   Your requirement to manage its key influences to profit.

These are not questions for a product manager or functional team. These are business strategy issues that need the full attention of the senior management team. Structure follows strategy, and without this strategy, any plan that a brand or product manager puts in place will likely not be congruent with, or supported by, the rest of the organization. Yet, day in and day out, this happens in many organizations. Instead of utilizing proper resources to develop a corporate-wide initiative, the well-intentioned marketing and sales team launches a tactic that exposes the entire organization to possible failure.

The challenge for many senior management teams is to find the right methodology and resources to develop and implement the proper strategy for their firm. This need not be a complicated or timely process. In fact, most facets of this process can be handled in parallel with e-commerce process design efforts. For organizations that spend time in this development phase, the returns can be lucrative.

A recent study points out that best-in-class supply chain organizations that launch business-to-business strategies achieve remarkable results:

   50 to 80 percent less inventory investment

   40 to 60 percent faster cash-to-cash cycle times

   30 to 50 percent increases in on-time shipments

   Up to 7 percent cost advantage gains

Successful e-commerce
Successful e-commerce means enabling your back-office processes to service customers in very different ways. It means becoming customer-centric throughout your organization. It means enabling new technologies to enhance your employees efforts.

Unlike traditional channels and sales methods, e-commerce customers have very different needs and requirements. These customers are information-rich. They have more data, and therefore more control, than at any previous time. They demand higher levels of performance and service from their supply chain partners.

In addition to servicing wholesalers and distributors, many newly established e-businesses sell directly to the end-user for the first time. This customer requires vastly different levels of product service and support than a wholesaler or distributor requires. Do you know what those needs are for your e-commerce market space? Can you profitably satisfy the needs of these e-commerce customers? Without a thorough self-evaluation and pre-planning process, be prepared for the backlash. After all, the Internet is the quickest, most direct way of telling or showing your customer just how efficient or, sadly, inefficient -- your order fulfillment process really is.

During the past holiday season, many e-businesses showed customers just how lousy their planning and execution systems really were. Many could not ship on time. Others promised delivery they simply could not meet. Why? Outside of the occasional traffic problems, the Web sites worked fine. However, in most cases, the fancy HTML and Java applications were not linked to the back end, so they couldnt execute business. The information flow failed, from the customer acquisition process to the order fulfillment process. All this by supposedly Web-savvy, battle tested "dot-com" companies. Imagine whats going on in the minds of your potential customers.

Can this work for you?
In almost every organization, there is little question whether to develop and launch an e-commerce program. The Internet has changed the way everyone will do business. It is the dominant force impacting virtually every company. It has re-shaped the competitive landscape. Some industries with high barriers to entry find themselves infiltrated with new and emerging competitive players.

A recent, controversial example is in the recording industry. Utilizing the Internet and associated technologies, MP3s have turned the sale and distribution of recorded music upside down. They are developing an entirely new method of delivering product to the end-customer at a potentially far lower cost. Although there is much uncertainty about how to pay everyone involved in creating and distributing the product, there is no doubt that the music industry will dramatically change.

One of the most talked about examples of dot-com change is Amazon.com. In a market where distribution and point-of-sale barriers created a true oligopoly, Amazon used a new competitive technology to change the industry. Although critics point out that Amazon has it own problems (lack of profits, for one), the company has changed the market space forever.

The primary questions for your senior management team are: Could an "Amazon.com" enter our market? How could it be done? Can we do it ourselves? What can we do to prepare our organization? How do we develop an Internet strategy that aligns with our organizations capabilities, processes, and goals? Or, if you have already stepped into e-commerce, how do you evaluate whether your Internet strategy aligns with the rest of your companys business initiatives?

The answer lies within your own organization. Every company must develop its own strategy to leverage its e-commerce opportunity. Every organization deals with its customers and suppliers differently. Your company must craft a thoughtful, sensible integration plan that dovetails with your other strategies and your companys culture. Ultimately, your supply chain program must support your strategy.

Order fulfillment: Your e-commerce weapon for success
For most companies, the development of an e-commerce strategy, and the output that the process produces, typically identifies the order fulfillment processes as key to successful implementation of the strategy. Order fulfillment is the embodiment of the touch points the firms end-customer has to the organization. The O/F process includes distribution, logistics, transportation management, inventory management, order picking/shipping, CRM, and call center/order processing management. In fact, any internal or external sub-process directly affecting the firms ability to deliver the "perfect order" falls under the order fulfillment process. Unfortunately, in their zest to implement "solution" software packages or suites, many firms and their software vendors have not looked at the processes themselves as part of the solution.

Most companies implement their strategy by simply plugging in software without fully understanding the implications. Implementing an enterprise-wide resource planning (ERP) package, warehouse management system (WMS), or customer resource management (CRM) package is a potential big win. It is also a potential business killer. Not only is the process a drain on the firms resources, but if not implemented correctly, it can cripple you. If you have not done the process foundation work up-front, all you will do is automate old (and possibly poor) business processes.

Successful order fulfillment firms, whether "brick" or "click" based, continually re-engineer their operations. They combine the latest in business processes and technology, directed toward the goal of the perfect order. They have learned (some the hard way), that they must make the necessary investments to meet their customers evolving requirements and their own need for lower cost.

For most, this does not mean acquiring the latest and greatest technology. It does mean, however, that they must use the predominant process to meet the requirements. The right equipment or level of investment needed to supply the level of service required will vary between firms, even in the same market space. The key is matching the proper solution to the problem. The only true and proper measurement of this comes from your customer.

Regardless of your current product, service, or market position, e-commerce has changed and will continue to change your market space. You need to change your business model just as quickly. Your organization needs to react now. You need to develop your e-commerce strategy and mobilize your organization to execute it.

If you have already begun, re-evaluate your initiatives to date. If you are unsure where to begin, get some help. Someone in your market space will be the dominant player in three years, and undoubtedly will utilize e-commerce to make it happen. With strong planning and execution, it could be you.

Bill Dowding is president of The Welfleet Group, a consulting practice focused on strategic development and implementation and business process re-design efforts. Contact him at or .

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