E-business: A business necessity?

Posted by Go Online Business on Sabtu, 05 April 2008

E-business (electronic business) is not only about buying and selling, but also servicing customers and collaborating with business partners on the Internet.

In the late '90s, e-business was seen as the Holy Grail of commerce - the next big thing. Promises included increasing the efficiency of distribution, disintermediation, reducing marketing and procurement costs, and decreasing errors in data distribution. Investors pumped billions into companies with no more than a business plan and a spreadsheet. It was a revolution and virtually everyone was on board.

Then, between March 11, 2000 and Oct. 9, 2002, the technology-focused NASDAQ Composite Index lost 78 percent of its value as it fell from 5046.86 to 1114.11. E-business became the butt of jokes on "The Tonight Show" and "Saturday Night Live." Virtually everyone got out of the tech stock sector. Investors and decision-makers were overenthusiastic during the rise and overenthusiastic during the fall of the tech sector. The truth and the value of e-business lies somewhere in between.

There were numerous problems with the implementation of e-business in the '90s, as there have been problems with technology implementations all along. (Note the FBI's recent abandonment of its four-year, $170 million software project to track terrorists.) Obviously some of the business plans were not viable (selling dog food online comes to mind), but many others were. Some ideas required revamping legacy systems in a short period of time, which was impractical.

Technology has been changing so quickly in the last 20 years that nontech companies have found themselves challenged to keep up. When business strategy and technology come together, you often have mature, experienced business managers who lack an understanding of technology interacting with younger IT people who understand the technology, but not the business uses. Communication between the two can be difficult at best.

Perception vs. reality

According to the eWorld Survey by IDC, one of the premier global market intelligence and advisory firms in the information technology industry, there are a number of areas where the promise of e-business has fallen short of the reality.

The perception has been that the website is the primary focus of e-business initiatives. In reality, it is also about tying existing systems to a server that allows information to be accessible to the Internet. The study says, "There is still a lot of work to be done. Sales, logistics, supply chain, customer relationship and database software investments can and must be leveraged by corporate websites." The gap between what companies expect of their e-business investments and what their existing e-business infrastructures are capable of exists in two dimensions: the capabilities of the websites themselves and integration with core business systems.

E-business for small business

Although there are many examples of well-executed, relatively small e-businesses on the Internet, some still believe that the hurdles are great for small businesses desiring to conduct integrated e-business ventures. The truth is that declining service provisioning costs, like server, communications and hosting have allowed smaller businesses to make big waves in this arena.

According to the IDC study, "Small enterprises can benefit from the Web by gains in productivity and by tapping markets not previously available to them. While many small firms are particularly challenged by the complexity of inhabiting the (Internet), they need not make giant leaps to get there. Online capabilities can gradually evolve from e-mail to simple websites, then to providing pre- and post-sales online environments, then leveraging their Web investments to make internal processes more efficient."

While it is certainly true that the first generation of e-marketplaces has had trouble gaining critical mass, the IDC study found that brick-and-mortar companies know about e-marketplaces and plan to use them.

Regardless of the pitfalls and problems, the Internet has clearly revolutionized the way we do business. Internet-based product research and procurement, e-mail, the ability to sell surplus items on eBay, Internet-based Electronic Data Interchange and other Internet-based functions have all become accepted and even critical parts of our everyday business lives.

Despite its slow start, successful e-business projects in the aftermarket are many and diverse. From the Technology Enhanced Standards-Based Trading (TEST) program, which uses industry standards to create an automated trading environment between Dana and O'Reilly, to ArvinMeritor's exceptional Web-based trading exchange, aftermarket companies are realizing and implementing e-business to finally achieve some of the goals that were promised a decade ago.

Here are a few other examples that come to mind.

Bob Moore, in his opinion piece, "Staid Carquest makes bold acquisition" (in the December issue of Aftermarket Business), mentions Worldpac. He states, "They have been a remarkable case study in taking the traditional aftermarket business model, standing it on its ear, kicking backsides and taking names."

Worldpac is an Internet-based ordering system that has built a several hundred million dollar aftermarket business that focuses on providing high-quality parts for high-end specialized import repair shops.

The HDeXchange, Inc. (www.hdexchange.com) is a nonprofit organization dedicated to improving the efficiency of the heavy truck parts industry through electronic commerce solutions. Edward Kuo, general manager, states that there are currently 120 major distributors using the exchange, which represents more than 50 percent of parts purchased by independent distributors in the market. HDX is currently examining how their model could be employed to benefit the automotive aftermarket.

One example from the performance and accessories side of the market is Reliable Automotive, a performance and accessories aftermarket WD, headquartered in Kansas City. Alise Miner, Reliable's IT director, pointed out at the Aftermarket eForum in Chicago last August that their Internet-based ordering transactions have increased from 24 percent to more than 80 percent in the past two years.

Realizing the hurdles

Here are a few final hurdles to realizing the advantages of e-business.

"The Last Mile" is a phrase developed to describe the difficulty of getting broadband Internet service into homes and businesses. Delivering technology to the end user in our market represents a similar challenge. According to "e-Commerce in the Canadian Aftermarket," a 2003 report funded by AIA Canada, interview and focus group discussions indicate that lack of participation among installers could be a barrier to achieving e-commerce goals within the aftermarket.

Legacy systems are probably the biggest issue affecting the adoption of e-business technology. Much of the legacy software and methods of doing business in the aftermarket will need to change. Current problems include information scattered across different physical locations on computers running disparate operating systems.

A third hurdle is difficulty getting cooperation within the enterprise. Here's a quote from the Dana/O'Reilly TEST Report: "Central among the findings of the TEST team was that cultural issues, not technological issues, were the greatest impediments to effective implementation of standards-based trading. It seemed that more time had to be spent selling the idea of adopting standards than on the actual compliance with them."

Tapping into technological potential

Some of the other rewards of all this hard work, most of which have yet to be realized, are data mining, knowledge discovery and artificial intelligence.

Data mining is the extraction of hidden predictive information from large databases.

Knowledge discovery is the process of identifying valid, novel, potentially useful and ultimately understandable patterns and models in data. One famous example is the discovery by a supermarket chain that there is a high likelihood that men who purchase beer also purchase diapers. Who knew?

Artificial intelligence is the work of programming computers to make decisions in real-life situations. An example would be a software program that notes a sharp decline in inventory of a best-selling product and automatically places a reorder with the preferred supplier.

Here are some questions that might be answered by data mining and knowledge discovery tools. Does the average 30-year-old Caucasian male in the Atlanta suburbs purchase a bug deflector to enhance the look of his vehicle or to limit bugs on the windshield? When are the primary bug hatching times in St. Paul, Minn.? Will extreme winter weather in the Northeast enhance the sales of batteries and coolant? How will stainless steel exhaust systems affect exhaust system installers in the north central states vs. the northeast states vs. the southern states? Should we be geographically repositioning assets?

A recent Gartner Group Advanced Technology Research Note listed data mining and artificial intelligence at the top of the five key technology areas that "will clearly have a major impact across a wide range of industries within the next three to five years."

One final concept that can be implemented in stages and begun immediately is a concept we will call "Data Maximization." Data maximization is the process of discovering all of the existing and potential desires of various sets of information recipients and then planning and building toward the sum of those desires using data that is currently in our control. Some of this information will be the normal items stored in a database: purchase orders, product numbers, specifications and installer locator data. Other sets of information might not be currently stored in a database, such as installation diagrams, product images and material safety data sheets.

Put yourself in the data user's shoes. If you are a replacement brake manufacturer, a repair shop might need installation diagrams, service notes, technical service bulletins, recalls, safety notes, part specifications and a part number cross-reference. Online training could also be provided, and WDs may need online ordering and information to assist them in supporting their jobbers and installers, as well as current promotions, sales training, and pricing and inventory.

Data maximization is a two-way street. The more value you provide to the user by meeting their needs, the more information you will be able to glean from your user base, either through online ordering habits, tracking their online behavior or user surveys.

The cost of technology implementation is often more heavily weighted on the side of training and acceptance than it is on actual software and hardware. The cost of beginning technology implementation and then abandoning it can be devastating. This may require more extensive research and planning than other business processes and perhaps needs a healthy dose of skepticism. The bottom line is that e-business is a must in order to compete in today's environment. Ignore it at your peril.

Author: Dan Jondron

Blog, Updated at: 01.47

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