Postcards from the Edge: Lessons Learned from Leading Edge E-Business Success Stories

Postcards From The Edge: Lessons Learned From Leading Edge e-Business Success Stories

The practical value of these lessons is most successfully applied in the context of a structured approach - a methodology - for e-business in your enterprise.

By Alberto Ruocco, Vice President & Strategy Practice Area Leader

Rapid change. It's the defining characteristic of the booming Internet economy and is straining the ability of many organizations to make intelligent e-business and technical decisions.

A profusion of new business models, such as trading exchanges and online auctions, are sweeping through traditional marketplaces - creating new ways of interacting with partners and customers and, above all, new opportunities for distributing goods and services. And to make matters more complex, Internet technology is evolving very quickly.

How can you ensure your technology and business choices are flexible enough to successfully ride the waves of change? And what will help insure that the best informed, "bet-the-business" decisions are made in your company?

The answer? Learn from the experiences of others in the context of a proven e-business methodology.

Charting the Course to Profitable e-Business
Any e-business methodology must start with a thorough study of the business setting, which is called e-Strategy. The analysis must account for changes in the industry, as well as the real or perceived impact an e-business initiative will have on current competitors, strategic partners, supply chain partners, and customers. The strategic master plan should have a scope of one to three years.

Additionally, the methodology will have to consider five areas:

· New e-business process models based on an analysis of current business processes and recommendations from functional experts and customers (e-Function)

· An appropriate technical strategy, development, implementation, training, and infrastructure management (e-Build)

· A selection of vendors, contractors, or outsourcers for managing the technical environment (e-Manage)

· A comprehensive marketing strategy that addresses the different interests of employees, suppliers, existing and potential customers, alliance partners, and other third parties (e-Marketing)

· And, finally, mechanisms for measuring the e-business strategy's impact through quantifiable returns and impact assessment, as well as mechanisms for re-calibrating strategy and pursuing new initiatives (e-Return)

All successful e-business scenarios will require this multi-pronged lifecycle methodology. But different e-businesses will require more or less attention to the different aspects of the methodology, depending on the peculiarities of its own industry, technology, customers, or partners.

For the most part, inefficient business processes cry out for an e-business solution. What is less obvious is that some industries may not be mature enough to handle a radical change of a business or e-business model.

Learning from Companies on the Forefront of e-Business - Blueprints for Success Magellan Geographix
A straightforward example of e-business' value is the case of Magellan Geographix. They recognized the Internet as a way to provide better delivery of its product, production-quality maps.

Magellan launched Maps.com, a Web site through which they sell their high-resolution maps to customers. Before adding the Internet distribution channel, Magellan relied on overnight delivery services and 3.5-inch computer disks.

Maps.com provides a way for Magellan to immediately deliver maps of higher resolution and accuracy, thereby satisfying the needs of customers whom may only have hours to assemble complex content (e-Strategy).

Because electronic delivery of Magellan's maps occurs in minutes, and because the cost is much less than its physical counterpart, cost savings largely funded the development and deployment of Maps.com (e-Return).

There were technical challenges related to the deployment, however. Specifically, Maps.com had to partition the e-commerce application into order-taking and content delivery to handle peak traffic and prepare for anticipated growth (e-Build).

Moreover, while the order-processing server is outsourced to SB.Net, the media server is maintained in a high-bandwidth Web server hosting facility run by Rangefire Integrated Networks. Rangefire plans to open data centers in multiple cities to accommodate such distributed serving.

A key lesson to be learned from this example is that the Internet makes diverse application serving a natural solution to the bandwidth and reliability limitations of any single service provider. Application developers should design applications as loosely coupled components with an eye to deployment at multiple Internet points-of-presence (POP).

Peapod, Inc.
Sometimes, however, an e-business scenario morphs when there is a change in the surrounding business environment.

Take the case of Peapod, Inc., the leading Internet grocer. As the grocery industry consolidated, Peapod faced a potential conflict of interest with their strategic partners, the independent grocers in various local markets. These partners grew wary of sharing strategic information with Peapod, whose services might come into direct competition with them at some time in the future.

Peapod had to decide whether to change their relationships with these partners or sever them completely (e-Strategy).

Peapod elected to move toward centralized fulfillment through a Peapod-operated distribution center (e-Function). The new model, which they believe will increase their control over service quality and decrease overhead costs related to fulfillment, gives them the flexibility to reduce their fees to consumers and spur demand for their services.

Peapod receives goods from a variety of wholesalers, including their former joint-venture partners (e-Marketing). In 1999, Peapod spun off their software group to form Split Pea Software, Inc., which will license their online grocery and shopping delivery systems. Split Pea will also be able to license software to the same brick-and-mortar grocers whom distanced themselves earlier from Peapod.

The major lesson learned at Peapod was the need to better address the real and perceived conflicts their e-business strategy caused among their strategic partners, from small independent grocers to large chains (e-Marketing). Measuring the effectiveness of the changed strategy will be key to Peapod going forward (e-Return).

The National Transportation Exchange
In other cases, e-business can insert itself into a supply chain without causing friction.

That has been the experience of the National Transportation Exchange (NTE), which operates an e-commerce hub for matching unused truck capacity with loads waiting for pick-up (e-Strategy).

Because the NTE system is real-time and neutral, members freely trade information, maximizing their visibility in the $400 billion trucking industry (By some estimates, 30 to 50 percent of the industry's capacity is underutilized.).

Essentially, NTE saw the business value of mediating the difference between users of transportation services, whom typically have an information horizon of one to 12 months, and the truck carriers, whom typically have an information horizon of nine to 12 hours (e-Function).

By creating a trading hub that connects customers to carriers and manages the mismatch in their respective information flows, NTE brings visibility to the whole supply chain, allowing real-time decision-making.

Speed to market was critical for NTE, which was formed in 1994 and launched the beta of "The Exchange" in March of 1995. Full production implementation was ready by August of that year. NTE commenced commercial service to a small segment of the industry (dry freight in the Midwest) in 1996, but has since expanded in scope and now claims more than 350 industry members.

At least two lessons can be taken from the NTE experience. First, the operation started on a small segment of their industry. This shows an appreciation of the fact that gaining customer trust may be more difficult for e-business services. Equally important, NTE recognized the critical need to enter the market quickly (e-Strategy).

Second, driven by the requirement for speed, NTE relied heavily on third parties, and has virtually no IT operations, having outsourced much of their operations management and new development (e-Manage).

NTE recognized that e-commerce is a service, not a technology. There is no sustainable competitive advantage in technologies used; rather, competitive advantage is only found in the availability and accuracy of information and its use.

In summary, the positive impact of a comprehensive e-business methodology cannot be overstated. To derive the full benefit, this methodology must be understood as an iterative process, constantly reapplied in the face of changing business or technological circumstances.

Alberto Ruocco is a Vice President for The Revere Group. He has over fourteen years of information technology (IT) industry experience, including over nine in IT consulting, and has knowledge in the advertising, retail, manufacturing, health insurance, direct marketing, banking, and oil and gas industries. Alberto has a B.A. from Yale University in Architecture and an M.B.A. in Strategic Planning from Northwestern University's Kellogg Graduate School of Management.

The Revere Group