E-commerce is currently the hottest topic besides Y2K, and more and more is being published on the subject. One area that I find lacking in published material on the topic though, is "How do I move from my current position into e-commerce?"
The first step towards moving into the new digital economy is to understand the benefit of such a strategy.
Keeping in mind that statistics and predictions indicate that the majority of electronic business interfaces will be in the business-to-business (B2B) arena - this should be on every CEO`s agenda for the next year.
E-commerce should be approached from a consultative perspective rather than a product perspective. There are many "instant solutions" available on the market that tend to adopt a plug-and-play approach. These products are based and built on assumptions that are not understood by the purchaser and could drastically reduce the value of the offering. Conversely - by following a consultative approach - these underlying assumptions would be explored and understood and so the proper value can be extracted from the application.
Developing a digital strategy
The first step towards moving into the new digital economy is to understand the benefit of such a strategy. What are your business drivers, what are your market drivers, what is your competition doing and, most important - what are your customers` expectations? Once you have decided on these aspects and are convinced you need to move in this direction, you need to develop a proper digital or e-commerce strategy.
Keep in mind that when I refer to your customers I use the term in the broadest sense of the word, ie external and internal customers. We too often forget we are only one link in a process or value chain. Your digital strategy should apply to your total value chain and not only focus on the front-end.
When you consider where e-commerce is presently being applied most successfully, it is in B2B at the "back" of the chain between supplier and distributor or manufacturer. This is where the high volume, low customisation, high impact processes can be found in most businesses. This is also the starting point of the value chain in delivering to the customer and therefore a logical place to start with your strategy.
What`s implied by this approach is that the integration of your processes is primary to delivering to your customer. Secondly, you need to understand what the nature and impact of these processes are and the assumptions they operate on before selecting an appropriate e-commerce solution. Imagine what the impact on your customer base would be if you suddenly tripled your product or service demand via your new Web site and the delivery process was not strong enough to handle the supply. You will lose more than just customers - you will lose credibility as well.
Your digital strategy should address the aspects of expected market demand, product mix, customisation, distribution or physical delivery at the front-end as well as delivery process, process capacity, etc. If you cannot balance the input at the back with the demand at the front, you are creating a potential business disaster.
Typical stages of digital strategy
There are two aspects of digital exposure that I want to clearly distinguish between - forward integration and backward integration. Forward integration holds the higher risk exposure profile for the organisation while backward integration often implies a greater change in culture and process transparency. The stages of digital exposure for each aspect are similar with some variations in application and expected result or return on investment. I have created the following levels for ease of categorisation and understanding:
Forward integration:
This could be either B2B or B2C depending where you are in the value chain.
. Level 1: A Web site with basic contact details (information only).
. Level 2: A Web site with electronic brochure (information only).
. Level 3: A Web site with catalogue (information only).
. Level 4: A Web site with shopping basket (information and selection) - order but no payment methodology.
. Level 5: A Web site with shopping basket (information, selection and payment).
. Level 6: A Web site with interactive services (information, selection, payment and delivery).
When you are operating on levels 4 to 6 it is generally accepted that you have an e-commerce presence, but this is only the front-end of your business. Let`s look at the back-end.
Backward integration:
This is for B2B.
. Level 1: Digital ordering or inventory (information only).
. Level 2: Digital ordering and inventory (information only).
. Level 3: Digital replenishment (automated ordering - information only).
. Level 4: Digital replenishment (automated ordering and integrated inventory - information and update).
. Level 5: Digital integration (automated ordering, integrated inventory and payment).
. Level 6: Digital automation (fully integrated process - sell one, make one).
Here, in a B2B environment, level 1 upwards will be classified as e-commerce. Note that all these levels can be serviced across an intranet, extranet or the Internet. The intranet and extranet will provide access for internal customers (intranet) and selected regular/strategic customers (extranet). The Internet will provide open access in most cases although it could host only internal and strategic customers on a log-in/password basis.
The further you progress from level 1 to level 6, the more system and process integration becomes an issue.
Once you have decided on your digital strategy and the level you want to operate at, you can start making informed e-commerce decisions for your business. What you do with the information you gather or have on hand is of course also another element of digital strategy relating to customer relationship management and other areas of business intelligence - but I`ll discuss these aspects next time.
* Ron Pienaar is MD of Ornet Solutions, a member of MB Worksoft, the software and services arm of JSE-listed MB Technologies.
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