E-business - the voyage - johnpatrick.com

National Business Bulletin – E-business – the voyage

Wednesday, July 1, 1998

Our advice for e-business is to ‘start simple – grow fast’. That’s the philosophy of Robert Savage Chief Executive of IBM Australia who also points out that’ to take advantage of e-business is a challenge to re-structure business systems rather than the challenge of technology.’

Just what is e-business? Without having all the answers you may already be involved in it. e-business includes smart cards, e-mail, payment by phone or fax, plus ATM’s and EFTPOS. And of course it includes those more sophisticated on-line items such as the internet, world wide web, intranets, EDI or extranets.

These are ‘hype’ words of which the most common is e-commerce. Unfortunately e-commerce has created in the minds of business optimists, that you only need list your products or services on the internet and commerce will automatically flow.

The realistic answer is – it won’t! Listing of products and services and then hoping that they will attract eager, electronic buyers anxious to do business is as likely as the shy male who thinks it is only necessary to buy a dinner suit to automatically receive calls from a host of female admirers.

Already you may have been inundated with statistics proving just how much business can occur on the net. Cisco creates 42% of its sales on the net (worth $9 million a day). By July this year it forecasts its annual sales online will be US$5 billion with savings by this simplified process worth $300 million which they then plough into research and development. Dell Computers claims sales of $4 million a day online with an internet sales budget more than $1 billion for this year and an expectation of half its sales from the net by the year 2000.

Amazon Books did $64 million in the last quarter of 1997, an increase of something approaching three times from the corresponding period the year before.

What then are the chances for your own organisation converting the costs to go on the internet into sales figures which puts your organisation into a dream world of new business?

THE CHALLENGE

The answer can be expressed very simply. It is not a question of whether e-business is ready for you, but how ready are you for doing e-business?

e-business must become the centre of your marketing plan, as a whole new concept. Marketing takes your products or services to the people. The internet brings the people to your products. That’s a whole new interpretation.

John Patrick points out as world wide Vice President of Internet Technology, IBM Corp, that ‘The internet is evolving just as the radio set evolved from AM to FM to Stereo, to Full hi-fi, to tapes, and finally to compact disks. So the internet will also change. ‘More importantly,’ he warns ‘you and your organisation must change in advance of the changing internet.’

‘The internet is not just ‘click here to buy some fishing lure or a bottle of salsa’, it can be ‘click here to start a complete supply chain,’ he points out. This means that it may commence a ‘Just In Time’ (JIT) inventory flow between Company A and Company B or enable employees to engage in a new orientation session.

John Patrick goes on to point out ‘The way the web expresses information may also change. At the moment you accept a black and white page – no colour, no pictures.

Ultimately that will change. And if the picture doesn’t have a person who is helping you and talking to you, you may in the future turn off. It’s a whole new medium.’

Don’t think e-business just happens on the internet. You have to make it happen. Amazon Books only has such rapidly increasing sales because its prices on the internet are 15% lower than the same book in normal stores. Because it saves costs of warehousing etc., the costs are immediately passed as an incentive to customers.

Steve Brown, the owner of the Australian Fishing Shop puts it neatly ‘Ninety nine percent of people who visit a web site go there for information. Who are you? Who works for you? What are your credentials? What products do you sell? What sort of service do you give? What’s your back up support and so on.’

‘Give people the opportunity to keep coming back to your site’ he says. ‘Use a bulletin board, live chat, greeting cards or whatever. Give a prize once a month for the best suggestions given by those who are just browsing.

‘Make sure you give people alternative ways of buying a product. Not just their credit card. You might consider phone, fax or e-mail. It makes it easy for the customer to buy.’

But make sure also that you give instant answers. In a recent survey to 32 Australian banking and insurance organisations, each was asked a relevant question on either banking or insurance. The average response time was 63 hours – 2.5 days. The worst was 35.5 days after the request. That’s not customer attraction. It’s rejection.

CASE HISTORIES

This evidence of complete lack of understanding of what e-business is all about flies in the face of statistics which show it costs a company $20 to process a phone inquiry but only $0.50 to process an enquiry by e-mail. Have the answers ready on tap.

Let William J Conley Junior, Vice President Logistics and Electronic Commerce of the Asia-Pacific Federal Express tell you what e-business really means. ‘Last month we had 8.6 million ‘hits’, a figure which grows about 10% per month.

Not all these people were real buyers as some were going to our web site to find information about us. They got instant information about our products and services without having to place a phone call. That’s 8.6 million phone calls we don’t have to answer. That has to be a whole bunch of cost savings.’

The company had to completely revolutionise its methods of handling business .. e-business. William Conley gives an example of the improvement ‘We had 2.1 million calls last month on the basis of ‘Where is my order – what’s happened to it?’ The average phone call for a trace is about five minutes. Now those 2.1 million traces are done on-line. We eliminated the need for over 10 million minutes on answering phones. Just think how many people we saved. Customers find that information on the net.

He talks of an approach often termed Mutual Growth Marketing .. where both parties profit. ‘We give our customers our software free. They use that information to generate our transport documents. When our courier shows up he simply walks in, picks up the packages and documents and leaves. Its a productivity improvement for us – and them. Thus we now have given out 150,000 software placements around the world which are saving us time.

No doubt you have heard it said that – with the internet – the world is now your oyster.

Sounds great .. but what do you intend to do to attract the world? Back to Federal Express for their answer. ‘We had to go international of course so our web page is in German, Spanish and soon Japanese and French – it even has an Australian web page and speaks Australian.’

And they are not afraid to sell themselves. ‘We have a learning centre so that you as a customer can enter and learn case studies about other customers who use us.

‘I have a bookcase full of old policies and procedure manuals’ says William Conley. ‘These are now gone. They are now on the web page. We no longer distribute these to our customers for we’ve built help pages on the web and if they get lost in following instructions our help pages will pop up and tell the customer what the next step is.’

So what are your chances of succeeding with e-business? Well – if you have only one product and it is a world desired product, you are fortunate indeed. In January this year we told the story of Gough Plastics who are a Telstra Small Business Award winner from Townsville.

They have developed a world reputation in rotational moulding and they have linked their details with the world association located in Ireland which is on the net. That way they can be easily contacted. Their sales run into the millions but only recently they went onto the internet themselves. Already they now estimate 5% of total turnover comes from that area. It obviously pays to be unique.

If you have a ‘me too’ product, then maybe you should heed the message of Bob Savage of IBM Australia. ‘Start simple – grow fast.’

RE-STRUCTURING THE SYSTEM

So lets think through this problem of handling a ‘me too’ product. Right now in Australia there are music stores which are doing enormous business on the internet by sending out tapes and CDs ordered by customers – but at a reduced price.

So lets think this through. This is not a cheap operation. In fact it is said that for every ten items you list on the net compared with a person with one product, your costs will double. Think therefore of the enormous listing required with all the titles for music either by tape or CD.

Think also of the triggering that must go on to instantaneously advise if items are out of stock and to automatically set in motion in your accounting system proper re-ordering so that a client can be advised when they can expect the product they have requested.

If you don’t think that’s such a problem, then realise one of Australia’s biggest retailers has gone off the net. The costs of updates exceeded the entire sales they achieved.

Do your homework before you spend money that doesn’t pay. Think of how you should display your product pages so that any browser is encouraged to keep looking and hopefully to keep ordering. Whatever the incentive offered, it must change regularly. If the prospect returns to a list which has been unchanged since the last time he or she made contact, then make no mistake other stores will be getting their business.

Realise that customers are basically as lazy as they dare to be. When they click they want an instant reply. At the moment therefore it is better to stick to text but remember you must be prepared for the change to showing possibly the colour of the CD rather than the name of the item.

Just to handle instantaneous replies on text may require a computer with many times the power of what is currently available – maybe an extra $30,000 investment. And think of the extra cost when colour arrives and when the bandwidth available allows you to show it in 3D.

That could mean if you are selling motor cars that you can virtually sit inside the car or, if you are booking a seat at the Sydney Opera House you can by virtual reality sit in the seat allocated to check whether it suits your buying reasons.

Having a web site designed for you is an art in itself. There are a heap of software providers and so called web experts glad to offer their services. Then be warned! There are more doubtful experts than there are professionals. It then becomes a case of the blind leading the blind. Thousands of dollars wasted, complete disillusionment with the responses to the web site with the organisation still chained to the methods of the past when they should be operating in the future.

Let’s explain further. Would any reader at this stage dare to move into an expensive retail site in a shopping centre and never having been in retailing before, leave the complete fitout of the shop, its presentations, its incentives and its messages, to a skilled carpenter? Rest assured presenting your company on the net so that it sells more than it costs, requires a professional. e-business is already there waiting for you. Are you ready for e-business?

THE DANGER ZONE

Is it possible that e-business may already be developing so that competitors are conceiving how to put you out of business? Philip Holt, Managing Director Australian Business Chamber says that all business is now faced with a twofold challenge.

‘First you must critically assess the ways in which business is being done globally’ he says. ‘Secondly you must understand how you fit into that change.’

‘Try and become leaders of a distribution channel, or better still become an owner,’ he says. Bill Gates of Microsoft has proved that once you own the distribution channel you are king. You call the shots.

That’s the high side. Now let’s look at the low. ‘Insurance brokers have traditionally sat in the middle ground between customers and insurance companies’ says Philip Holt. ‘Today’s advanced technology however, allows insurance companies, at the touch of a button, to have their message sent direct to any customer anywhere in this country.

‘Why close local banks,’ he asks. ‘Because with technology it is now more economic for people to walk to the ATM at their convenience 24 hours daily or have electronic access to a complete range of banking products or services.

‘Our own association is creating strategic alliances with a wide range of businesses using distribution channels created by others’ says Philip Holt. ‘This is another form of networking which reduces overheads by sharing channels. It can be achieved by working with other organisations who are aiming different products to yours, but to the same customer base.

‘Avoid becoming just a middle-man.’ he warns ‘An intermediary does not have the ability to add value to a client’s business. But intelligent use of alliances and new technologies means that collectively you may have more firepower in many ways than do major corporations.’

The Honourable Richard Alston, Senator and Minister for Communications points out that ‘Industries facing the most change are financial services, travel, retail, music, books and advertising. These industries are well suited to on-line ordering. Thus their retail outlets may disappear along with their warehouses etc and they become an internet supplier.

‘The traditional role of intermediary such as agents and wholesalers will disappear or become transformed’ he warns. ‘More providers will go directly to consumers and more consumers will do their own searching.’

ADVANTAGES OF THE INTERNET

Senator Alston went on to point out that: ‘The small look big – it levels the playing field. Customers want the quality of the transaction, not the size of the company.

Whose in charge of business? By the year 2000 it will be the consumer who works a 24 hour timetable anywhere around the world.

And his final message? ‘The web should not be an afterthought. It should be the centre of gravity of a business .. e-business.’

QUICK TIPS

Choose a simple, short address for your site.
Go with text unless you have a very powerful (and expensive) computer. Pictures and graphics are slow to reproduce.
Update and update.
Produce special advertising and product ‘sell’. Don’t transfer your brochures.
Register your existence with search engines.
Offer products and services that have uniqueness.
Provide items that are cheaper, faster and more reliable.
Publicise on every item of stationery your Web site.

And now a final message from IBM where John Patrick points out the changes that can occur in the next year or two. ‘For the Olympics 2000, millions of people will likely think of the internet first with TV second. On the internet they know they will get exactly what they are looking for because they know what sports they are following and what countries they are supporting. They will ask exactly their interests and in their own terms.’

Those who remember the TV transmission of the Atlanta games which concentrated almost solely on US competitors will certainly appreciate this new internet approach.

The final message? It’s worth repeating.

Start simple – grow fast The challenge is in re-structuring your business systems, not in the technology. The question is not ‘Is e-business ready for you?’ but rather ‘How ready are you for e-business?’

E-business – the voyage