 |
Branding Laws · Internet Marketing · eMarketing · Internet Advertising · Online Branding |
|
Branding Laws · Internet Marketing · eMarketing · Internet Advertising · Online Branding |
|
Driving E-Business Excellence
Anitesh Barua, Prabhudev Konana, Andrew
B.Whinston, Fang yin
Presented By
Vandana Janeja
TM Cisco Systems
The Internet EcosystemTM
w Interdependent layers
w Can’t do it all by yourself
w Partnerships & alliances
w Strange bedfellows
w New business models
Layer 4:
Online
transactions
The Internet Economy
Layer 3:
Intermediaries
Layer 2:
Applications
Layer 1: Internet
infrastructure
Operation model for E-Business value creation
w Model’s premise: Achievement of E-Business
Operational excellence will lead to improved
financial performance
w Need to know:
n What drives E-Business operational excellence(Drivers)
n Central components to E-Business operational excellence
Data collection
w A 74-item questionnaire developed by CREC researchers
w Over 4500 U.S. and European firms contacted by MarketVision Research.
w Approximately 1200 firms responded to the survey
Industry Respondents
45%
35%
11%
9%
Retailers Manufacturers Distributors Wholesalers
Employee Distribution
59%
10%
31%
Less than 100 Between 101 and 400 More than 400
Central Components
w Measures of Operational Excellence
n Traditional
n E-business
w Online Revenue
w Online Procurement
w New Customers
w Existing Customers
w Customer Service
Central components to E-Business
operational excellence
Traditional measures
w Inventory turnover
w Order-to delivery cycle time
w Mistakes in order fulfillment
E-Business measures
w % of organizations total business online
w % of goods purchased online from suppliers
w # of existing customers doing online business
w # of customers acquired online
w % of customer service requests handled online
Companies with E-Business measures show
w Significant increase in revenue per employee
w Significant increase in gross profit margin
w Return on assets
w Return on investment
How can a firm achieve high levels of financial benefits in e-business?
(Table 1)
w Comparison of driver levels of firms reporting increase in financial performance
with firms reporting no financial gains
* à significant at 10%; ** à significant at 5%; *** à significant at < 1%
E -business drivers
Revenue per
E mployee
Gross
Margin
ROA ROIC
System integration *
Customer Orientation of IT (Informational) *** *** *** ***
Supplier Orientation of IT (quality)
Supplier Orientation of IT (supply -continuity) * ** **
Supplier Orientation of IT (relationship) *** *** *** ***
Internal Orientation of IT *
Supplier Processes * *
Customer Processes *** *** *** ***
Supplier E -business Readiness * *
Customer E-business Readiness *** *** *** ***
Do operational excellence lead to improved financial performance? (Table
2 in the report)
Increase in Revenue
Per Employee
Increase in Gross
Operational Measures Margin
No Yes No Yes
% online revenue 10.5 40.4 12.0 42.2
% online MRO procurement 11.3 19.7 11.6 19.1
% online production goods
procurement
12.3 23.6 12.9 21.6
% service request resolved online 16.8 40.2 19.2 40.7
% new customer acquired online 10.9 43.4 15.2 43.3
% existing customer doing business
online
14.8 43.9 15.3 45.3
w Comparison of operational excellence measures of firms reporting
increase in financial performance with firms reporting no financial gains
Effect of firm size on e-business impact
(Table 3 in the report)
Average Increase for firms
with revenue < $1 Million
Average increase for
firms with revenue >= $10
Financial Measure Million
Mean Median Mean Median
Increase in revenue per employee 46.9% 40% 13.2% 5%
Increase in gross margin 39.6% 25% 11.8% 8%
Increase in return on asset 47.6% 40% 10.3% 5%
Increase in return on invested
capital 50.2% 50% 20.9% 10%
w Comparison of average and median financial gains for firms with revenue < $1
million and revenue = $1 million.
Small companies with less than $10 million
in annual revenue
w Take more advantage of internet capabilities
n Have fewer problems with system integration
n Have Flexibility to make changes
Online Revenue
w High % of revenue online- leaner company
w Size of sales staff reduces
w Tasks shift to the customer like gathering info,
entering orders, tracking shipments
Online Procurement from suppliers
w MRO goods and Production goods
w Lower prices
w Better coordination with suppliers
w Fewer problems with stock outs
w Smoother production schedule
w Just in time operations
w Importance of Online supply chain management
Levels of Online Procurement
(Table 15 in the report)
% Online Procurement
0% 1% to 20% 21% to 50% > 50%
% of firms procuring MRO items online 34% 41% 16% 9%
% of firms procuring production goods
online
42% 31% 20% 14%
n Average level of online procurement of all firms
Acquiring New Customers
w Finding new customers easier
w Not constrained by geography, or physical office in
a location
w Marketing expenses reduced
w Web to reach small companies
w Acquiring new territory without a lot of financial
input.
Existing customers
w Getting existing customers to do business online
w Transfer of trust in the relationship to online one
Customer service
w Provide much needed information online
w Speedy responses to questions
w Online communities
w Interactive features for customers to help
themselves
Companies with significant financial gains
w Have high % of online revenue
w Have high % of online procurement
w Have high % of online new customer acquisition
The Bottom Line On Operational Excellence
Drivers of E-Business
Drivers of E-Business excellence
w Three areas
n E-business processes for customers and suppliers
n IT applications for customers, suppliers and
internal operations
n The E-Business readiness of customers and
suppliers
Customer Related Processes:
Processing of information and execution of tasks
w Customer : Request or a complaint
n Providing a single point of contact
n Coordinated internal processes for immediate response
n Quick response
n Processes in place for smooth information flow
n Customer feedback incorporated into the processes:
design, manufacturing, QA
Supplier Related Processes:
Processing of information and execution of tasks
w Exchange of information
w An environment of mutual trust for this exchange
w Type of information for exchange
w Level of precision required
w Frequency and channels of exchange
w Format and security of data
Example, CISCO : knowledge about product quality
w Installed software and test equipment at
manufacturing and supplier sites.
n Real time information
n Monitoring defect rates of products coming from
suppliers
IT Applications: Customer orientation
w How to give customer info and how to get customer
info
n Comprehensive FAQs
n Details about products
Customer orientation of IT – Informational (Table 5 in the report)
% Agree
Customer Orientation Question (Informational)
“No” to increase in
Revenue per
Employee
“Yes” to Increase
in Revenue per
Employee
All product -related information is available online
(e.g., price, product description, catalog, etc.).
56% 81%
Customers can customize their orders online
without phone/face -to-face interactions.
33% 64%
A comprehensive FAQ section is available online. 45% 58%
Customers can interact using online forums and/or
communities (e.g., chat rooms, bulletin boards)
23% 33%
Customers see personalized content (e.g.,
products, prices, order history, order stat us, etc.)
when they log onto the web site
27% 40%
w Comparison of informational capabilities(providing info to customers) of firms reporting
increase in financial performance with firms reporting no financial gains
Customer orientation of IT – Transactional capabilities (Table 6 in the
report)
w Comparison of customer transactional capabilities(online order) of firms reporting increase
in financial performance with firms reporting no financial gains
Availability of Transactional Feature
“No” to Increase in
Revenue per Employee
“Yes" to Increase in
Revenue per Employee
Customer Orientation Question
(Transactional)
No Yes No Yes
Customers can submit orders online 46% 54% 18% 82%
Customers can modify orders online 70% 30% 43% 57%
Customers can pay online 64% 36% 32% 68%
Customers are notified of their order
status automatically
70% 30% 47% 53%
Customers access a secure website for
ordering and other interactions
54% 46% 26% 74%
IT Applications: Supplier orientation
w Online communities
w FAQ’s
w Supplier Evaluation reports
w Automatic ordering
w Online Invoicing
w Order Status tracking
w Electronic payments
Supplier orientation of IT – Transactional capabilities (Table 8 in the
report)
w Comparison of supplier oriented transactional capabilities of firms reporting
increase in financial performance with firms reporting no financial gains
Availability of Transactional Feature
“No” to Increase in
Revenue Per
Employee
“Yes” to Increase in
Revenue per
Employee
Supplier Orientation of IT Applications
(Transactional)
No Yes No Yes
Systems allow automated invoice
transmission and processing
64% 36% 63% 37%
Systems track status of orders online 74% 26% 71% 29%
Payments are electronically sent to
suppliers.
70% 30% 72% 28%
the numbers are low while differences are minimal Which means most firms
have not tapped into the vast potentials for efficiencies. This is consistent with
lack of synergistic processes and readiness
E-business processes – Suppliers
(Table 12 in the report)
w Majority of the firms have not leveraged the Internet and other IT for
supplier relationship management
% Agree (somewhat to strongly agree)
Supplier Processes Related Measures “No” to increase in
Revenue per
Employee
“Yes” to Increase in
Revenue per
Employee
Method of sharing product roadmap and demand
forecast with suppliers is well defined.
26% 28%
Information exchange policies with suppliers (e.g.,
frequency, precision, real-time or delayed, format,
and channel) are well defined.
29% 38%
Supplier selection criteria are well documented. 43% 52%
Supplier quality monitoring process is well defined. 37% 45%
Alliance between Home Depot and GE
systems
w Web based alliance between home depot and GE
w Home Depot wanted to offer more products while
keeping less inventory
w Home depot can have goods directly delivered to
purchasers from nearest GE warehouse
w Link between HD point of purchase data to its
accounting processes and to GE business systems
IT Applications: Internal orientation
w Access to internal information
w Intranet
w Quality library(repository of internal documents)
w Example GE Capital: 50% reduction in time spent
in obtaining access to project information
Internal Orientation of IT
(Table 13 in the report)
w Majority of the firms have not leveraged the Internet and other IT for
internal operations
% Agree (somewhat to strongly agree)
Internal Orientation of IT Applications “No” to increase in
Revenue per
Employee
“Yes” to Increase
in Revenue per
Employee
Employees can retrieve required information
through corporate intranet.
51% 52%
Employees manage administrative processes
online.
38% 41%
Best practices/project management information is
available through the corporate intranet.
28% 33%
Firms have not benefited from ubiquitous Internet infrastructure. There is no substantial
differences between firms who say “yes” and “no.”
Systems Integration
w Customer, Supplier and internal applications
w Seamless interactions
w Tying together internal and external systems
w Home Depot – complete integration of online and backoffice
capabilities
w Lack of integration between online and back office systems
created major order fulfillment headaches for Toys-R-US
E-Business Readiness of Customers and Suppliers
w Weakest link in the value chain
w Solve by committing resources to the problem
w Example : Dell: Online supply chain management
application
n to help component suppliers to get direct access to
customer order information
w Amazon: lack of readiness, led to building costly
warehouses
E-business readiness – Customers
(Table 14 in the report)
w Customers of firms with observed increase in financial measures are generally
more ready for e-business
% Agree (somewhat to strongly agree)
Perceived Readiness of Customers “No” to increase in
Revenue per
Employee
“Yes” to Increase
in Revenue per
Employee
Overall
Customers feel comfortable regarding
security and privacy in electronic
commerce
52% 78% 69%
Customers consider it important to engage
in electronic commerce
49% 76% 67%
E-business readiness – Suppliers
(Table 14 in the report)
w Suppliers of firms are generally NOT ready for e-business
% Agree (somewhat to strongly agree)
Perceived Readiness of Customers “No” to increase
in Revenue per
Employee
“Yes” to Increase
in Revenue per
Employee
Overall
Suppliers have Internet-based systems to
engage in electronic commerce.
47% 59% 56%
Suppliers feel comfortable (regarding security,
privacy etc.) engaging in e-business
41% 55% 49%
Suppliers are willing to share information
electronically with us.
53% 65% 62%
Suppliers consider it important to engage in e -
business.
47% 56% 53%
Suppliers consider it important to improve
coordination and collaboration.
65% 66% 65%
Model of E-Business Value
% Online Business,
% Online Procurement,
% Customer Service Provided Online
Order Delivery Time, etc.
Revenue/employee,
Gross Profit Margin,
Return on Assets, etc.
IT
Applications Processes
E-Business
Readiness
Customers
Suppliers
Internal
Customers
Suppliers
Internal
Customers
Suppliers
E-Business
Drivers
Operational
Excellence
Measures
Financial
Measures
? Copyright Barua, Konana, Whinston and Yin 2000, CREC The University of Texas at Austin
Conclusion
w Every piece of the puzzle is equally important
w Encouraging participation from all players
w Focusing organizational resources in areas of
opportunity
w E-business transformation by complimentary
investments in all arenas.
Factors of Success
by Segment:
FY2000 Survey
Increase in
Internet Users:
2000-2001
Ref:The E-com Journal, http://www.ecom.or.jp/ecom_e/latest/ecomjournal_no3/wg6_e03.htm