What are the key factors in the business optimization of an e-commerce initiative?
The rise and apparent demise of the internet has left us with invaluable lessons in its aftermath. Perhaps the most important one is: It's the business, stupid!
e-Business is the art and science of creating business value through the internet. Personally, I like to think of e-Business as business use of the Internet. The "use" results in a business benefit such as higher revenues, reduced costs or reaching an underserved market. The "internet" includes all technologies and applications enabled by the Internet. At every step of an e-Business initiative's lifecycle one must evaluate its ability to create business value.
Phase: Identifying and Selecting
A company's business model is its formula for success. It lays out its means and method of value creation for its shareholders. Hence, assuming that this formula is correct, everything that follows must conform to it - this includes e-Business initiatives. When identifying and selecting e-commerce initiatives, one must only look at the ones that provide a clear and, if possible, quantifiable business benefit. More importantly, this benefit must be sustainable and in line with the company's business model.
Every initiative must address these key questions:
- Does this e-Business initiative support or enhance my business model?
- What is it supposed to deliver? When?
- Does it change the fundamentals of my business? How?
- How does it relate to the rest of my organization's capability?
If an initiative does not adequately address these issues, in the least it requires more analysis and at the other extreme, it should not be pursued. Here are some common pitfalls to avoid:
- Competitor is doing it: Competitive analysis must factor into an e-Business initiative. However, just because a competitor is doing something does not make it the right thing for you to do. It might fit their business model, hence they are pursuing it. Does it fit yours? In most markets success hinges on competitive differentiation not conformity. If competitive parity is the goal then it must be thoroughly analyzed before a dollar is spent on implementation.
- Great technology innovation that the customer will definitely like: Customer needs analysis is the key to an initiative's success. Many times in our fascination with a new technology we assume what the customer wants: this is such as neat feature that my customers will definitely appreciate it. Wrong again. Ask your customers what they need and want - do not assume and make decisions on their behalf. Avoid technology for technology's sake at every turn.
Phase: Funding
Many initiatives will pass the criteria outlined in the previous phase. However, only a few deserve to be funded. Apply the 80-20-5 rule and if appropriate a more stringent one - less than 20% of the identified initiatives should be selected and less than 5% funded. To be funded, an initiative must address the key question:
- How will this investment produce results?
- How will we measure them?
One must always:
- Focus on results: Results must be quantifiable but more importantly, sustainable.
- Question the promise: If it sounds too good to be true it usually is.
- Stay focused on the business model: An initiative must enable or support an area of competitive advantage. If it doesn't, do not spend time and money on it, even if the promised payoff is tremendous. Rest assured, it will not pan out.
- Focus on short payoff period: Do not accept an initiative that delays the payoff. If the payoff is in the distance then it might as well be too distant. Break an initiative into smaller phases, with the investment phase being less than 10-20% of the total effort. Make a go/no go decision at each step.
Phase: Build and deploy
A lot of good work often goes to waste in this phase. To deliver on a great promise one must plan its implementation to the last detail. Time and money saved in planning is lost exponentially in implementation. Every initiative's implementation planning must address the key question: How will all the pieces of my organization work together during and after this implementation? A company's processes, organization, infrastructure must work in harmony with the new initiative or it will fail, sooner or later.
Phase: Monitor and Adjust
This is the forgotten piece of the puzzle. Nothing goes exactly as planned. Hence, one must monitor and make course corrections as necessary. One should also try to document lessons learnt so mistakes are not repeated and best practices incorporated in future endeavors. One must address the key questions: · Have we realized the promise? · What is keeping us from it? Getting the biggest bang for the buck from an e-Business initiative is a matter of acting like a venture capitalist - as if your own money is on the line. And remember, in this new world the fundamental rules of business still apply.