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Companies get serious about e-business, but they can't afford to make mistakes

A forthcoming study by MORI reveals some interesting trends as the e-business model unfolds. If you thought the U.S. had a clear lead on Europe, guess again.


By Linus Parker

Every business isn’t going to radically transform into an e-business or IPO-raging dot.com overnight. Even so, the Web has forced many companies to reevaluate current value chains and embrace new ways to perform traditional tasks, such as e-procurement and Web-based analytic and business intelligence tools. However, e-business must be clearly defined at the board-level for success to be realized.

To operate successfully in the digital economy, companies must prepare to run their businesses according to new rules. With competitors just a mouse-click away, the e-business marketplace doesn’t recognize physical or historical boundaries or the longevity of established relationships. In addition, e-business requires the best products and services to be available at a price that's transparently competitive. The emerging e-business marketplace won’t wait while all the paperwork and administration is completed. Delivery and service are demanded now!
Founded in 1984, Intentia is a Swedish ERP and e-business solutions provider. In 1998, the company posted $300 million (U.S.) in revenue and had 3,200 employees in 40 countries around the world.
The Internet has become a market leveler. By that, I mean that it enables smaller companies to enter the game and compete head-on with the big boys. According to the results of a survey by Market & Opinion Research International (MORI) for Intentia, many tier-two companies in Europe and the United States are allotting considerable resources to enter the digital economy. Although the detailed findings will be published in a comprehensive report due out in the second half of February, the following summary of the results illustrates how Internet-based transactions will become an increasingly important part of companies’ income. One of the most interesting points of the forthcoming report is that the U.S. may not have a considerable lead over the rest of the world in adopting e-business initiatives. Some European countries are not far behind.

What do the numbers say?
In the next two years, e-sales in tier-two markets will represent an average of 15 percent of total sales in the U.S. ($270 billion) and 12 percent ($152 billion) in Europe. Companies surveyed in the report believe they can generate a high return on investment (ROI) over the same period, with U.S. companies forecasting an average ROI of 27 percent and European companies forecasting 20 percent.

E-business and the corporate imagination
All the evidence points to the fact that e-business is beginning to capture the imagination of business decision-makers and planners. Since the Y2K debate subsided, many tier-two companies cite e-business projects as top priorities. According to the research, 91 percent of U.S. companies have someone at the Board-level responsible for e-business, whereas the corresponding figure for European countries is considerably lower, at 68 percent, with the notable exceptions of the UK and Sweden. Ninety-five percent of companies in the UK have someone at the Board-level responsible for e-business, followed by Sweden at 88 percent.

E-business must be compatible with brick-and-mortar counterparts
E-business is not just about setting up a standalone, electronic shop window, commonly known as a Web store. While this can look exciting and seductive and attract lots of customers, it doesn't do any favors for the rest of the company that has to deliver the promise to customers. Web initiatives must complement traditional sales channels. The research illustrates weaknesses in the efforts of U.S.-based companies to achieve this goal, especially with respect to how Board-level executives view the role of e-business. The executives who participated in the survey defined e-business as follows:
  1. Selling products (39 percent)
  2. Communicating with customer (32 percent)
  3. Promoting the company (25 percent)

If decision-making executives want to maximize the benefits of doing business electronically, they must adopt the same enterprise-wide approach they took when planning and implementing enterprise application systems; such action must involve the entire supply chain.

The next two years are critical
The majority of companies surveyed are convinced that within the next two years, e-business will be mission-critical to managing customers and suppliers. Some companies (39 percent) are so convinced of its necessity that they believe if they are not “switched on” in two years' time, they will have difficulty surviving. While that may or may not prove to be the case in the medium term, there is no doubt that as prices continue to drop, particularly on commodity products, many companies will be forced to look for new routes to market and lower cost overhead. That noted, 42 percent of the companies in the report said that e-business will force them to radically reorganize their operations, as well as alter distribution channels.

There are always contradictions in the data. For example, while many companies readily recognize the dynamic changes that the Internet has on their business, only 5 percent of the U.S.-based companies and 10 percent of the European companies perceive a threat from those companies currently engaged in e-business. Yet, the majority of the companies, 64 percent, assert that e-business will give their companies a clear competitive advantage.

E-business success will not happen overnight
Larger corporations, especially those in the vanguard, such as Ford and General Motors, have already undertaken this challenge. They are leveraging their e-business strategy with traditional methods when dealing with customers, suppliers, and partners. In the main, however, companies have to take a balanced approach. On the one hand, they need to recognize this is not a revolution where everything that went before has to be abandoned. Not everything will or should be expected to change overnight.

The pace has quickened but the smart companies are undergoing a quiet evolution. They are taking a considered, holistic enterprise-wide approach to e-business that's based on well-proven methodologies that enabled them to both update their IT systems and transform their business processes.

These successful companies mix new and old business processes, adapting them to suit the new electronic medium. They know this way is proven, offers less risk, and is less expensive. In a conventional market, a miscalculation with one customer can remain within the confines of the relationship. But on the Internet, the whole world knows in a mouse-click. The pressure really is on to get it right first time, every time.

Linus Parker is the managing director for Intentia (UK).

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