The rush to the Internet is the gold rush of the new century. Whether a company has already invested millions to implement an e-commerce presence or whether still devising the approach, most companies know they need an e- business strategy.
E-business is the best paradigm available to business since the advent of the PC, bringing previously unimaginable revenue and profitability as well as efficiencies in value chain management (inventory, production, product development, marketing, customer service and sales). The highly visible successes have been numerous. But there have also been many failures. There are several reasons some companies have failed to reap the benefits of this powerful phenomenon:
Lack of focus. Many of the dot- com companies that started by targeting the general consumer thought that, with lower overhead, they could quickly and easily surpass the established brick- and- mortar companies. However, the challenge to reach consumers in the virtual world is even greater, as it is more difficult to focus on a group of like- minded buyers. Not focusing makes customers costly to reach and harder to convert.
Investors have become disenchanted with lack of revenue and are either pulling their funding or changing direction. Two trends are occurring as a result:
- Those staying in the consumer arena now recognize the value in merging with the brick-and-mortar companies an excellent solution as it combines the best of both worlds.
- Business- to- business (B2B) has now become the new popular focus. The danger is that without focusing on specific types of business functions, companies pursuing this strategy will find themselves in the same place as those consumer dot-com companies with a limited number of customers.
Messages aren't meaningful. One of the common mistakes vendors make is to assume they are creating a new community of users. This problem occurs when companies define the market as the application, losing sight of the customer and what would work with them. As a result, they think the market is fragmented and customers hard to find.
In actuality, customers are already part of an existing segment. For example, consumers under 20 belong to the group "teenagers," which can be split further into young and mature teens. What is important to them, the products and services they buy, how to reach them and the language they use are different than for other groups, such as retirees.
Companies without focus end up marketing to everyone with a message not meaningful to anyone. This is both costly and ineffective. This problem occurs not only when selling to external customers, but also when IT working internally with the company's lines of business focuses on the technology instead of their business issues.
Required assistance not available. Business units and customers are often expected to use e- business solutions with very little assistance. Many vendors think that when they have made the sale to IT their job is done and that IT has the resources needed for implementation. This is often not true. Norman Carter, president and CEO of development systems international, inc. (dsi), supported this view when he said, "Many companies rushing to win new markets through the Internet do not think about the entire business process. There are more stakeholders to be included than ever before. B2B projects are no longer the exclusive territory of IT."
Apply Fundamental Principles
The process of establishing an e-commerce business and building adoption around it is no different from establishing a new business in the traditional non- Internet world. The same principles apply. Following are the 10 basic principles for building an e-business strategy:
- Not all customers are created equal. As Paul Wahl, former CEO of SAP, said, "Not all customers are created equal." In a recent column, I wrote that "every customer matters." In reality, some customers matter more than others. The most valuable customers i.e., those in "the sweet spot" have the greatest need for the product or service and are, therefore, willing to pay more, close the deal faster and implement more quickly.
- The key to success is focus. Without focus, resources are wasted reaching the wrong audience or appealing to too few with a poorly developed message. Focus provides structure and perspective to any e-business endeavor. Focusing on the sweet spot allows companies to provide meaningful solutions, delivered with meaningful language, so more customers are likely to adopt.
The market is already defined. Companies create categories, not markets. There are over 140,000 SIC codes each with its own language and strategic business issues. Within these SIC codes, there are departments (HR, IT, sales), business functions and job titles. Markets should be viewed as an aggregate group of buyers that share the same characteristics, have the same issues, respond to the same messaging and have the same purchasing needs. A company may create a new technology category, i.e., B2B analytics. However, the users of B2B analytics do not comprise a distinct market. By confusing the category with the target market, the market will seem fragmented. B2B analytics is a category that can be used by many different markets in different ways and for different reasons. Airlines might use it to price their seats throughout the year, while technology companies might use it to identify the product configurations in greatest demand.
- Market leaders select segments they can dominate and ultimately own. Siebel Systems' success is based on this premise. The ability to choose and focus on a segment is crucial to success. Siebel Systems started by targeting sales management. They have since expanded into related segments such as field service.
All technology is complex and customers require more assistance to adopt new technology. Most people resist change. E-business is a new paradigm that changes the way people work and as with other technologies requires assistance. Providing the pre-sale education services (motivation, education, needs analysis, evaluation, justification) that facilitate selection and post-sale implementation services (installation, customization, conversion, training, maintenance and support) that foster use are crucial to changing behavior and increasing adoption. Companies tend to ignore the service required for adoption. Yet, service is crucial to selection and use. For example, one well-known high-tech company recently found the primary difference between their best (most satisfied) and worst (most dissatisfied) accounts was the level of service that each account was buying. It is not surprising that the account that purchased the most service was the most satisfied.
- High touch is critical to changing behavior. High touch, or active marketing, is an important mechanism for changing behavior. Active marketing involves in-person interaction and gives users a chance to understand why they need to change their behavior. Users can get their questions answered, so they are more likely to overcome any fears about the proposed solution.
Those who define the playing field ultimately win. One of my favorite sayings is, "The best way to predict the future is to create it." The best way to create the future is by building and supporting the market ecosystem needed to reach the market. A market ecosystem consists of working relationships with all partners in the value chain who facilitate selection, purchase and use of a company's products and services. These relationships can define the playing field for adoption of a new technology or creation of a new category. Partners can include other technology companies to create a complete solution, associations that provide education, instructors and trainers who lead courses, and consultants who provide pre- and post-sale services.
Companies tend to focus on supply side-oriented strategic partners. But, demand-oriented partners are crucial for fostering selection and use of new technology. Adoption of one of the first microcomputer database programs (dbase from Ashton- Tate) in the early 1980s was fostered by their 200,000 or so ecosystem partners. Microsoft and IBM each have approximately 40,000 such partners.
- The market ecosystem is different for each product and its corresponding target or sweet spot. One size does not fit all, i.e., one market ecosystem does not reach all customers. The partners who understand and serve HR are different than those that focus on IT. Just as customers have different interests and strategic business issues, so do partners.
- The best way to dominate is through the associations that reach and influence the target segment(s). Associations consist of a group of people that share common interests and objectives. Through the association, they are able to network with their peers, exchange information, share ideas and receive education. There are over 100,000 associations, including the National Human Resources Association for HR executives and Society of Information Managers for IT executives.
There needs to be a fit between the customer target, their issues, the message and vehicle. The customer target, the issues, the message and vehicle need to be aligned. It is important to understand the target segment's issues, tailor a message that addresses those issues and deliver the message through the vehicles that reach them. This seems obvious, but the biggest cause of failure in any marketing program is due to a lack of fit between these four elements. The requirements, needs and motivations of medical professionals are different from those of engineering firms. Similarly, CEOs have different issues than IT.
The more things change, the more some things remain the same. The guiding principles for increasing adoption of e-commerce are the same as the guiding principles for increasing adoption of any technology. The more you follow these principles, the more quickly businesses will adopt your e-business strategy.
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