Improving profitability

Now that ABC has a plan to collect and join its data into a company-wide knowledge management (KM) system, it must begin answering the all-important question regarding improving profitability. Improved profitability can be achieved by utilizing the tools of the KM system. ABC can use the personal data of its customers to form a general description of its customer base. It can look at the products and services bought by the customer to answer questions regarding marketing and promotions. It can look at the internal notes on issues, complaints and resolutions to determine the best course of action when problems arise.

ABC can also improve its profitability by acting on the answers to its external environmental questions. It can improve its technologies to stay ahead of the competition. It can also utilize the technology and industry information to increase barriers to entry and effectively hold off competition for an extended period on time. The longer ABC can keep competition away from its customers, the longer it has to develop stronger relationships through increased customer service and to build up the customer’s loyalty to the company. Increased customer service and increased loyalty by the customer is a powerful barrier to entry in and of itself.

ABC can also act off the knowledge gained regarding its distributors and supplier’s power in the distribution chain. ABC can work to integrate systems and build stronger, mutually agreeable relationships with strategic alliances in order to minimize their power and increase ABC’s power in the chain. Because of the trends that can be seen from a KM system, ABC should be in a position to make educated guesses regarding its supplies and product substitutions. ABC should make it clear to its suppliers that if they cannot meet the demands of ABC’s customer to get the products delivered in a timely manner, ABC will seek out a comparable substitute from another supplier. The answers gained from the KM system will allow ABC to plan, create and implement an effective operations plan. An effective operations plan is only effective if there is also an effective financial plan. The financial plan of an organization takes into account many aspects of the business including viability, predictive accounting, operational costs and future goals, to name just a few.

In order to take a brick and mortar business and transfer its products and services online, the most important aspect to consider is the financial viability of the project. Just because a company is successful off-line does not necessarily mean that it will be a successful company on-line. Companies must live by the same business rules that traditional brick and mortar business live by. That is to say, once a traditional company expects more capital, then it should spend more money. This ‘traditional’ way of thinking, was not the direction that many early Internet retailers took. When one company, eToys, saw trouble ahead, and should have been looking to cut expenses, it still spent tremendous amounts of money on advertising.    This example is used quite often in the e-business arena to underscore the fact that a company cannot continue to show losses quarter after quarter and expect to stay in business. A solid financial plan is the first step a company must take before it takes the plunge into e-business.

Staying on this topic, we will next discuss how predictive accounting plays a major role in e-business success.

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These are fundamental questions that ABC must be able to answer in order to gage the effectiveness of its campaigns. It must know its customers’ ‘hot buttons’ in order to offer problem-solving solutions and advertise these solutions-based services to future customers. ABC could also look towards web analytical software to refine its marketing efforts and to help it determine future trends. The key to success is to not just gather and segment data but to use it to better understand customers. Once potential customers can be contacted and converted into true customers the next challenge is to ask the critical questions that will ultimately lead to a successful implementation of a company-wide e-business program.

Let us now examine the critical strategic questions that ABC Company must ask and answer to successfully implement its e-business operations. The focus will be on three main objectives: Data collection, joining information and improving profitability. Each one of these objectives will require a number of answers to a number of questions.   However, all of the answers shall be used for one purpose: to provide the management of ABC with the tools they need to assess their distant partners, or customers, and their direct partners, or distributors and suppliers.  These tools consist of INFORMATION.

Creating the e-Business - Part 1: Success Determinants

ABC Company
 

E-business is more that just selling products and services online. E-business runs the gamete from e-commerce sales to inventory management. E-business also encompasses operations, marketing and finance. The reality is e-business touches, in some way, every department within an organization. This is what makes e-business so complex. This is also what makes e-business so powerful. Over the course of this ‘blog, we will paint a picture of the many facets of e-business and thoroughly examine each of these facets in order to help the reader comprehend the vast nature of this beast. The first step to creating a successful e-business is to form a strategic plan based on the long-term goals of the organization.

ABC Company has a vision to grow its business into new industries, new product markets and increase overall sales via the Internet. It has begun these efforts by creating a functional e-commerce site. This site has a goal of becoming the preferred source for engineers and purchasing agents for sourcing, procuring and applying cogs. ABC’s hope is that along with increased sales, the site will allow its customers to self-service themselves around 50% of the time, if they so choose. This will allow its sales and customer service personnel to spend more time researching and contacting new potential customers.

Success Determinants

In order for ABC to succeed in its efforts to increase sales, break into new markets and industries, and create an environment wherein customers can self-service their selves, ABC needs to accomplish some major objectives. First, it must work to integrate its core business functionality into the site. The site must answer the types of questions that a typical customer or potential customer would ask, and it must give the user the power to research products, procure products and check on their orders after the purchase. These are the main functions that customers demand in ABC’s sales and customer service personnel.

Another success factor would be to integrate the information received online into ABC’s customer resource management (CRM) software program. The information obtained from online users could then be transferred to the larger enterprise resource planning (ERP) system. The results from online leads and sales could thereby be measured, studied and refined. The information from these studies could be used to market the site differently, allocate more or less resources to the site, change the functionality or usability of the site, etc. This phase of information integration is a key determinant to the future success of the program. A further review of internal and external environments is necessary in order to move forward with creating a successful e-business.

The analysis in question would come in the form of a SWOTT analysis. SWOTT stands for strengths, weaknesses, opportunities, threats and trends. The SWOTT analysis forces the company to look at its internal vision and the external realities that await it. If ABC wants to enter new markets and new industries, it must first understand the competitive nature of these environments and the buying nature of the customers.

In Part 2 of this "lecture" we will discuss this fictional company's goals and determine what role e-business plays in those goals.

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