e-Strategy: Thinking About e-Business Models (Part III)


Learn about the Transaction e-Business model, automating business processes and integrating with back-end systems. Discover its value, competition, and decisions organizations need to make in this insightful article.


This series of articles discusses different types of e-Business models. Part I introduced the concept and importance of e-Business Models, and Part II discussed the Information-based e-Business Model. This article focuses on the transaction-based e-Business model.

To recap, the first article laid out four e-Business models:

  1. Information
  2. Transaction
  3. Knowledge
  4. Community

Part II described the Information based e-Business model. This article describes the Transaction based e-Business models in detail.

e-Business Model: Transaction

Have you ever filled out an online form? Well, then, you know what a transaction-based e-Business model is!

A transaction-based e-Business model automates, i.e., the web enables a business process or a part of it. This automation can be a simple "contact us" form or a complete transaction to purchase auto insurance. Transactions require a complex set of programming to enable the web interface.

However, that is the start of this complexity. The real deal is integrating back systems to maintain data integrity and reduce the rework of entering the same information multiple times. Back-end systems integration usually breaks the back of most "older" organizations. This is where most organizations fail because of their inherent flaws in architecture and systems engineering. For example, a simple thing such as the definition of "customer" usually evades the "old economy" companies. If you do not know the definition of a term, how will you enter the transaction involving that term?

The second major issue is with multiple systems containing the same information. Good old data normalization - and the resulting integration layer - has evaded the most sophisticated of IT departments at large companies. Dysfunctional organization design - read turf wars - and lack of funding because of "unclear" ROI have led to this situation. These deficiencies are exposed like never before when companies try to go the way of the web! The result? Well, more spit and band-aids to patch up systems and perpetuate the ugliness. But we digress!

A transaction-based business model is the start of visitor interaction. The model can start from a simple "fill a form and get an email" to more complex interactions. For example, those seen in Web 2.0-type applications. More on this later. Suffice it to say, "Transactions" make a website stickier and generate more business value than "Information":

  1. "Me too": If you do not have a "contact us" form on your website, your life is not worth living! Or so the pundits would have us believe. There is a lot of truth to this statement because visitors are human and want to interact. So every web strategy must consider means of customer interaction with the company just to keep up with the Jones.
  2. "24x7x365" Operations: There is nothing sweeter than hearing the sound of the cash register ring while you are sleeping. If you are an online seller of anything, you can identify with this statement. If you do not sell anything online, you need to keep the doors open 24x7 because you might have customers in parts of the world that are not asleep when you are and who might have a question or inquiry for you. There are many more reasons to have a round-the-clock operation.
  3. Cost: Is it cheaper to have a customer do most of the work in a customer service transaction? The web has provided means to accomplish this enviable task. Online transactions are a way to pass on the work to the customer - and other players in your ecosystem - but be careful about the extent of work passed on to them. Also, be careful what work you pass on to them. More often than not, it is advisable to directly interact with your customers, not have them speak into machines or click at them!
  4. Revenue: Do some customers like interacting with machines more than pushy salespeople or slow tellers? Telephone Voice Response Units, Bank ATMs, etc., prove customers want convenience and privacy in their transactions. Vending machines and minibars prove that they will buy from a machine if it will sell stuff to them when they "must" have it! Online transactions accomplish the revenue goal in two ways:
  5. Customer service: 24x7 convenient service reduces cost. However, it accomplishes the important goal of creating customer loyalty. The latter is a value that can be cashed at any time!
    Online sales: 24x7 convenient online "mini-bar" sells things even at higher prices. This is slowly becoming the dominant sales channel.

The competition for this model comes from its offline cousins, the most important being the telephone. The reason to go with the web for transactions that can be done over the telephone is simple: better customer experience. However, the golden rule of transactions is: to use multiple channels because your customers want to! Do not substitute one channel for another till there is ample evidence that it is required. Complement channels. Transaction-based e-Business model is important for most organizations.

However, three decisions need to be made:

  1. How deep should we go with this model? In other words, what are the various types of transactions our website should provide? Note: not everybody can nor should everybody sell online. Not everybody can, nor should everybody, provide all customer service online.
  2. Should we have only this model? In other words, should other channels be active for the same transactions simultaneously?
  3. How can we make the customer experience seamless? Will our customers see and feel the same things if they saw, called, or clicked?

It is almost, but not quite yet, a crime to have a transaction-less site. Think before you jump into online transactions.

Examples:

  1. Simple "contact us" form: who doesn't have this? The question is: what do you do when someone contacts you?
  2. Shopping Cart: http://www.amazon.com/ and other online sellers have a business model that makes money even when sleeping. Well, almost!
  3. Online Exchanges: http://www.ebay.com/ connects buyers and sellers and makes a commission for every transaction. Their transaction-based websites are focused on all transactions to make this experience smooth and secure.
  4. Pay your bills online: Banks of every shape and size have this capability. So do Intuit and others.
  5. Pay your taxes online: You might hate paying taxes, but it is easier and quicker to get refunds if you pay electronically!
  6. Online voting: Switzerland has it. The US won't have it for a long time because we only like discussing democracy!

That brings us to the golden question: should a company like Boeing have online transactions, or should they stick to their information-based model?

Next, we will look at the Knowledge e-Business Model.




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