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- Define the Technology and Market Segments
- Identify Your Stakeholders
- Evaluate Common Customer Themes for Relevance
- Extending Business Presence Using the Internet
- Improving Customer Experience
- Reducing Costs of Securing, Servicing, and Retaining Customers
- Leveraging Existing Infrastructure Investments
- Improving Business Analytics Capabilities
- Merging Existing Systems from Different Companies
- Creating a Centrally Managed Security Model
- Create Your Plan
- Defining the Business Goal
- Determining Limits for Your Goal
- Drafting a Strategic Plan to Achieve Your Goal
- Performing a Pain Analysis
Chapter 1 Internet Solutions: A Needs Analysis
Few would disagree that the Internet has been one of the major catalysts of the late twentieth and early twenty-first centuries. New modes of communication have opened up new opportunities, methods for business, ways of connecting suppliers and customers, and ways to increase the ability to personalize communications and information depending on customer needs. This dramatic revolution is sparking customer awareness that they do not have to be bound to a single online businessthat any business anywhere can provide them with the goods and services they need. Because of this new awareness, businesses are reevaluating the ways in which they connect to customers using the Internet. No longer are showrooms, salespeople, and trifold brochures sufficient to attract and retain business; instead, customers are asking forand receivingheightened levels of awareness, sensitivity to their needs, and customization.
Because many businesses are not equipped to deal with the "new customer," they are starting over and conducting a deep, searching reevaluation of what their customers really want and how they can deliver it. New technologies are available to help interoperate with existing systems and integrate data into new and dynamic applications that provide the highest possible level of customer service. The leading-edge companies that have done this are finding a greater level of customer loyalty, reduced marginal costs and operating expenses, and broad new business avenues to explore. It is not an easy course, but it is ultimately fulfilling for both the customer and the business.
As the pace of technology advances increases, businesses are finding that traditional models of operation no longer provide adequate means for responding to change. This erosion occurs at all levels of business: in the way businesses deal with partners, in the way customers interact with businesses, and in the ways in which businesses operate. New demands are arising that require corporations to change the way they do business. Otherwise, they face a slow decrease in revenue and profitability as customers and competitors outflank and outperform traditional business models. Fortunately, most businesses realized the necessity for constantly improving their business models and market operations. It is not just early adopters or market iconoclasts that had this realization, but also industry pundits and traditional market leaders.
Today most businesses are looking for ways to identify, evaluate, and plan for new technologies to be integrated with their existing critical applications, business processes, and technological innovations. Despite recent economic downturns and the rethinking of existing business initiatives, most companies are looking at ways to streamline operations or enhance existing systems to regain their position in the market.
For example, International Data Corporation (IDC), an internationally recognized market survey and trends analysis company, estimates in its 2001 report, "E-Commerce Applications Market Forecast and Analysis, 2000– 2005," that businesses spent more than $5 billion on e-commerce application licenses in 2000 with a projected compounded annual growth rate (CAGR) of 25.7 percent to $15.5 billion by 2005. This reflects only external spending on licenses; it does not take into account any professional services, system consulting, or integration revenue. Globally, in its 2001 bulletin "IDC's Internet Commerce Market Model: The B2B Economy Goes Global," IDC also predicts that e-commerce activity of any kind will explode from $516 billion in 2001 to $4.3 trillion in 2005. This dramatic spending level is remarkable, reflecting a strong belief among industry and business leaders that money can be made by giving the customers what they want, even if that means reinventing one's own business to do it.
Many terms are bandied about when discussing Internet-based solutions for various customer services and service integration projects. Terms like business-to-business (B2B), business-to-consumer (B2C), enterprise resource planning (ERP), customer relationship management (CRM), supply chain-management (SCM), and the like have been plastered in newspapers and across Web sites, heralding the "new wave" of improved business processes. The acronyms are frequently used interchangeably, and there are often contradictions between the definitions being used, even among the companies offering or selling solutions to the market in hopes of enabling online business with customers.
For example, CRM is often seen as one part of a three-pronged business process environment, as shown in Figure 1-1. CRM focuses on managing all communication and contact with a customer, whether as part of a sales call, support services, or up-sell or cross-sell marketing efforts. It is an attempt to provide a unified face to the customer and exactly the service needed by that customer at any given time.
Figure 1-1. A holistic view of how technology intersects with e-commerce–based business solutions can be divided into three categories: CRM, ERP, and business analytics, also known as business intelligence. An ideal technology partner provides solutions that intersect with all these areas when customer needs change. (Image unavailable.)
To give some examples, CRM enables business users to do the following:
- Track customer information. CRM systems empower business users to access, update, and monitor diverse information about customers, from simple contact information to purchasing preferences.
- Respond to requests and anticipate needs. CRM systems enable sales and customer support personnel to quickly respond to requests and anticipate the needs of prospects and customers.
- Provide targeted marketing campaigns to groups of prospects and customers. Automated targeted campaigns provide repeatable and cost-effective activities. They also enable businesses to better measure the effectiveness and return on investment (ROI) of marketing campaigns.
- Manage customer status and activities enterprise-wide. A key difference between CRM systems and simple contact-tracking databases is the ability to manage all phases of customer activity from prospect to postsales support. Understanding customer behavior and activities can help with customer retention, and CRM systems can help manage customer activities without increasing staff.
The complete CRM system provides tools to manage all phases of prospect, customer, and partner relationships, enabling employees to respond faster, more accurately, and more cost-effectively.
The other parts of the diagram include ERP and business analytics. ERP is sometimes seen as encompassing all B2B activity, such as SCM. This umbrella usually covers anything that involves the actual production of goods and services. As we'll see, however, this area overlaps with CRM, as B2B suppliers and customers have their own set of needs for reporting, information, and business contacts.
The third area is business analytics, or business information and reporting. This very broad area encompasses such diverse activities as data mining, financial information and reporting, and even legal compliance and logistics information not directly connected to goods and services manufacturing. Business analytics takes the information generated in the other two areas and produces reports or suggested courses of action based on transactions, market trends, external and internal data, and so forth. As Figure 1-1 shows, all these areas producing an interlocking set of business processes and activities. When evaluating your business and its connections to others, you should consider whom the different customers for your organization might be. Thus the focus is not who the customer is but what services are needed from your company. This will help you identify which methods of connecting to customers need to be changed or improved.
When contemplating new customer-focused business models, it is critical to identify both people who have the business background to understand the issues that are being faced and people who understand the technology involved. These people will be responsible for driving the customer-focused initiative and are tasked with both the authority and the responsibility to achieve corporate goals. These two groups are commonly referred to as business decision makers (BDMs) and technical decision makers (TDMs).
BDMs are commonly vice presidents of business development, sales and marketing, e-commerce and e-business, or other individuals whose primary job function is not in information technology (IT). These individuals typically have customer needs and concerns as a primary business focus and can bring valuable insight as well as direct customer connections to the table. Many of their decisions are based on information and opinions from friends and associates as well as articles in magazines or journals. Information from sales representatives or consultants ranks behind these categories as primary information sources. Systems integrators and outside consultants play a less influential role, leaving the need open for a direct relationship with technology platform providers.
Further, BDMs have a more personalized set of motivators and business relationship drivers, and most have these characteristics in common:
- Evaluate vendors for vendor contribution to achieving the key business objectives.
- Have a vendor attitude of "commitment to the BDM's business."
- Define their primary goal as personalized attention.
- Define success as delivering solutions to a BDM's individual business problems.
- Seek partners who are proactive rather than reactive in identifying issues and proposing solutions.
- Want technology to work within the framework of their existing business.
- Are very conscious of the costs and turmoil that can result from a complete systems replacement, especially for global business.
- Believe a vendor's product quality is more important than having the latest technologyit needs to work.
BDMs often become involved early in the investigation cycle, helping set a strategic direction to make sure the project is on the right track. They then become involved again toward the end of the project to help plan the project implementation and measure its success against predetermined goals.
TDMs are commonly IT directors, technology strategists, or in some cases chief information officers (CIOs). They represent a small but important segment of IT professionals. These individuals typically work within IT or management information systems (MIS) departments and, although they may wear many hats, they spend more than 25 percent of their time making strategic IT business or policy decisions.
TDMs are in the unique position of bridging the gap between a company's business requirements and the technology infrastructure that will deliver on those requirements. These individuals bring knowledge of existing infrastructure systems to the discussion and are often familiar with new or emerging technologies and how they might be used in the business. Their main areas of responsibility include the following:
- Translating an enterprise's business strategy into a technical vision.
- Defining long-term IT strategy and technical platforms for the enterprise.
- Designing the architecture for enterprise business applications.
In general, most TDMs come from a technology background, and as they advance their careers, it is increasingly important for them to not only keep current with evolving technology, but to become knowledgeable and conversant in the business implications of technology decisions as well.
Together, these two groups can address many of the questions that will arise, identify customer goals and objectives, or identify positive ways in which to reduce a customer's pain. From this group it will be important to nominate or select a champion who has the full backing and approval of the company's CEO. Many e-business initiatives fail because of a lack of full cooperation and commitment from the highest levels within the company.
With something as expansive as a customer initiative, it is likely that every group or department within a company will be affected. It is also likely that some degree of organizational change will be required, such as realigning groups or departments and merging information or data from disparate systems. Nearly every organization resists change, making the need for a champion at the highest levels who can arbitrate any disputes even more important.
This is not to say that any customer-based initiative will always be painful or disruptive to internal processes. Often, customer initiatives succeed because of the enthusiasm and creative thinking that goes into creating new and exciting ways of doing business. However, for companies that remain entrenched in traditional business models"We've always done things this way" is their argumentthere is likely to be some pain as the business is being stretched in new and unfamiliar ways.
More businesses than ever are creating sophisticated new ways to connect with customers using the Internet. They're not doing this because it's the latest trend, or because they see everyone else doing it. Instead, there are sound reasons for doing this, reasons that are perceived to have short-term and long-term benefits for the company as a whole. (See Chapter 3, "Improve Your Business Processes with Internet Solutions," for a discussion.) Every business has unique needs and different reasons for extending onto the Internet, but many of the needs follow common customer themes and can be grouped into a few broad categories. Some of the categories overlap, and certainly there are ones that are not included here.
New or emerging businesses and traditional businesses both face a common problem: how to actively extend their business presence onto the Internet to secure increased customer revenue. New businesses have an advantage in that they are able to plan, develop, and deploy very rapidly; they have a major disadvantage in not having brand-name recognition or a large customer base. Traditional businesses have established customers, products, and services that give them a solid market presence; however, along with size comes a corporate inertia that frequently prevents the ability to plan, develop, and deploy new products and services quickly. For new businesses, the ability to conduct business online is sometimes referred to as "the new economy" or "the Internet economy." For existing businesses, this is sometimes referred to as a "brick and click" or "click and mortar" enterprise.
Both new and existing businesses want to extend their presence onto the Internet to secure new customers, new brand-name awareness, and new market segments. A static Web site isn't enough because most customers surfing the Web today are not interested in merely seeing a business on the Internet; they want to interact with it, collect information about it, and conduct business with it. As examples later in this book show, this dynamic interaction model requires repurposing many existing business systems and rethinking how to present information and business interaction technology to the customer.
Customers are looking for new ways to interact with businesses. They want to collect information quickly, to be able to conduct transactions, and to improve their experiences when dealing with others online. These needs can be broken down into three factors: time, convenience, and personalization.
Time is important to customers. As people's workdays and lives become busier, they seek faster, more efficient ways of conducting business: in other words, they want immediate gratification. Gone are the days when people would spend hours in line waiting for concert tickets or accept rain checks for out-of-stock products. Instead, people will go elsewhere to find someone who can provide the goods or services they want when they want them and how they want them.
Flexibility is perhaps as important as time. People turn to online sources for information about goods and services they want to purchase or to conduct business as quickly and efficiently as possible. People will read online reviews of plays or movies before purchasing a ticket, or conduct research on a car to see what other experiences people have had with a particular make and model. People balance their checkbooks, buy and sell stocks, and even play games with others over the Internet. These activities occur asynchronously; they are not likely to happen on any set schedule, but rather whenever the person has time.
Note that convenience does not necessarily obviate the need for traditional ways of doing business; rather, it can be complementary and can actually increase the ability to do business using traditional methods. For example, people might do research on cars they wish to purchase, but nothing can replace the experience of conducting a test drive. The ability to actually "try on" a car or other product will continue to be high on the list of priorities for customers. Companies that make it easy for customers to do the initial research online and then bring them to a retail store will be at an advantage compared with stores that rely solely on an online presence.
Finally, customers are interested in a customized online experience, also referred to as personalization, or the ability of a business to recognize a returning customer, remember that customer's preferences, and perhaps even provide suggestions about new goods and services that are available and that might be of interest to that customer. Personalization works much like a tailor at a high-end clothing store: The customer is greeted by name, made to feel welcome, engaged in discussion about topics of interest, and asked about satisfaction with previous garments bought at that store. New garments in the same style may be suggested, or new styles are suggested that might be of interest based on the customer's past purchasing history.
This level of personalization is fairly rare among most retail vendors, but those that use it are rewarded with a high degree of consumer loyalty to that store. Today's existing technology and tomorrow's emerging technology can provide this level of personalization to online or e-business customers and will thus provide a high degree of loyalty and return business to those companies willing to use these technologies effectively.
It is a common belief among business and marketing experts that it costs five times as much to secure new customers as it does to retain existing customers. It is also common knowledge that maintaining traditional service and support departments, such as banks of telephone operators, can in some cases cost as much as $75 per phone call received, regardless of the product. These two statistics show that the marginal costs associated with before-and-after sales activities can significantly eat into a company's gross receipts.
Technology provides a way to reduce those costs. Your business can reduce resale costs by using technology to provide useful and relevant information about goods and services directly to customers. Providing the ability to conduct online transactions can further reduce these expenditures. Postsale costs can be reduced if you provide self-help and online support applications or supply newsletters or regular e-mail to customers informing them of new updates, trends, products, or other newsworthy information. By reducing overhead, it improves your ability to increase gross margins and make your company more profitable.
Large and medium-sized companies, and to a lesser extent small companies, have existing infrastructure investments in place that are used to run various aspects of their businesses. These systems can include inventory management, accounts payable and receivable, Web sites, e-mail, databases, file servers, and other systems necessary for day-to-day business operations. Larger companies also have applications residing on mainframes and minicomputers, many of which cannot be altered or even taken offline.
These investments in systems and applications are often extensive and expensive, and most companies have no desire to completely replace these systems, even if newer or less expensive systems promise increased savings or improved business intelligence. Therefore, it becomes necessary to interoperate with existing systems and new systems that can provide a competitive business advantage. Interoperability and extensibility are important to customers when they enable a business to respond more quickly or provide new services and products in a rapid and responsive manner. (See Chapter 7, "Benefits Analysis: Retail" and Chapter 8, "Microsoft Frameworks," for a discussion.)
As the pace of doing business increases, it is imperative to make smart business decisions based on accurate business analytics. (See Chapter 6, "Benefits Analysis: Creating a Base Dynamic Internet Presence.") However, many companies find themselves hamstrung by an inability to determine how their own business is doing or to answer these questions: How much in sales was completed during the past week? How much inventory is in the channel? What are the sales trends for products over a period of time? Without such knowledge it becomes difficult, if not impossible, to make sound financial and customer-focused decisions, and thus the likelihood of success diminishes.
When you consider internal employees to be "customers" you can see that they will have needs with regard to obtaining business analytics, so improving their experience online will be a priority. Your employees can use business analytics and business intelligence to help them do their jobs better and to improve your company's operations. Thus, by creating a linking mechanism that connects raw business data and applications with a presentation mechanism for your employees, you convey an immediate benefit in the form of improved efficacy and quicker, smarter business decision making.
Frequently, businesses purchase each other or merge to capitalize on complementary business strengths. However, it is extremely rare for businesses to have identical information systems or even a common method with which to exchange business data. It thus becomes necessary to build an intermediary system that can both translate and transform data for each company.
In a mergers and acquisitions situation, companies frequently set up portal sites that act as information aggregators. These aggregators contain links to information sources within each company and provide access points to departments such as human resources or IT help desks. Additionally, they can act as building blocks toward creating a more permanent information aggregation solution.
Centralized security has been a goal of IT infrastructures since the early days of networks. Companies have sought to control authentication, authorization, and access and have tried to centralize it so that all aspects of information security can be easily managed.
With businesses becoming increasingly virtualized, extending the ability to conduct business directly and with a variety of partners, it becomes necessary to likewise extend the security infrastructure. Customers want to conduct secure transactions with businesses and be assured that their transactions are both confidential and have sufficient integrity to prevent misuse or fraud. By the same token, companies want to protect business data so that customers and competitors cannot gain access to financially sensitive information or valuable trade secrets.
Customers are also aware of privacy issues, and in many cases they are refusing to conduct business with companies that sell personal information to third parties or use it in a manner not authorized by the customer. As businesses extend their presence onto the Internet, they will need to be aware of privacy issues and be able to address them sufficiently for the customer.
The phrase connecting to customers will mean different things to different businesses. For some, it means putting together a full-on, bells-and-whistles Web site. For others, it means creating a comprehensive self-help application that covers billing, service and support, and account management. What does it mean to your company?
When setting out to connect to customers you should define your company's business goals. You might be tempted to create lofty yet nebulous statements like, "Reduce the cost of doing business" or "Increase our profitability," but you should instead create more precise descriptions of what you want to accomplish. The goals should be tangible and have measurable metrics that can be used to inform and guide you and let you know when you've achieved your goal. For instance, use the phrase "will be able to" as part of the goal statement: Our customers will be able to obtain billing information and up-to-date shipping status. Our suppliers will be able to access defect reports in real time. Our news department will be able to index, search, and cross-reference all Web pages. Feel free to aim high with the goals, and don't hesitate to ask your customers and users what they would find helpful. Things you might think are not important might be at the top of the customers' lists!
Once you have defined a goal, consider limiting its scope. Most companies plan multiphase rollouts, starting with pilot projects for select groups of users. You should approach your goal with an eye toward building some limits into the project. This will help you plan your development and deployment phases; if you set concrete, limited goals, you will have an easier time rolling out the final product to other groups.
To use the preceding examples, you could place limits like these: Our customers will be able to obtain billing information, but shipping information will have to come from a third party. Our suppliers will be able to access all defect reports, but the reports will be updated only when the batch cycle runs on the mainframe. Our news department will be able to index and search information, but cross-referencing will have to wait for a later phase. This is commonly referred to as a gap analysis: determining what the core capabilities of the systems are; what the company can do within a specific time period based on existing, available resources and skills; and availability of partners to help complete any gaps in the system. These limits can be seen as trade-offs from your blue-sky goals identified in the earlier step, and weighted costs should be assigned to each trade-off.
For instance, in the example of using the defect reports, it may not be possible to provide real-time reports without extensive coding and alteration of the mainframe batch process; this may not be an acceptable cost depending on code complexity, uptime requirements, application interdependencies, and so forth. The cost to implement this is high. But what if there were alternatives that could provide near to real-time reporting? Could a middle-tier application like an inventory database send an e-mail or use a messaging infrastructure to deliver a defect report? This may be an acceptable trade-off for the customer. In sum, be ready to explore why there are limitations and what those limitations are, and discuss how they affect the customer.
You will need a strategic plan to act as the touchstone for all other plans and documents to follow from elsewhere in your business. The strategic plan can be thought of as a business plan: you outline what your goals are and how you expect to achieve them; the resources you can bring to bear and a list of those you need to purchase, develop, or borrow; a pro forma financial statement or list of other metrics by which success can be measured; the leadership and key participating members and a list of functions; and a description of the development and "marketing" tactics you expect to use, along with a deliverables timeline.
This is an extensive collection of information to be assembled, but use it as a guideline rather than an exhaustive checklist you need to complete. What you are looking for is enough information to get a good feeling for what it will take for your project to achieve success. Because business is moving so rapidly, you will probably not have time to complete a thorough study and have all the questions definitively answered. In fact, if you try that approach, you are guaranteed to fail as iterative document drafts make the rounds for yet another series of reviews and discussions. Try to collaborate with customers or end users as much as possible, and use their feedback as the trump card; it is difficult to disagree with what the customer wants.
The following are some questions you should answer in your strategy document:
- Who are the customers? Take time to identify the customers and, if possible, identify actual people or customer groups who can be contacted with questions during the development process. These people should be considered your golden resource and should be present at design meetings and key discussions about your project.
- What are your customer's problems? Focus on what is not working or what could be working better for the customer. Describe the problem that needs to be solved, not the solution the customer requests. For instance, don't put the solution, "Need itemized bill of materials for the product" into your document. Instead, put in the problem, "Cannot identify individual components for a product." The former is a specific implementation. The latter promotes questions: What is the user trying to do? What information about the components is being sought, and for what purpose? The responses to these answers almost certainly will surprise you and prove enormously helpful during the design and deployment phases.
- What do the customers like or not like about your current way of doing business? This is a series of more open-ended observations that help lend background and depth to your current project. These observations may also open up new avenues to explore with your customers. For example, if you find out they don't like your Web site but do like a competitor's, you now have an avenue to explore for new and better ways to do e-business.
- When the project is finished, what is the expected result? In other words, if we do this, how do we add value? Will our costs be lower because operating expenses are reduced? Will it be easier to do business with us? Will we see an increase in repeat business? You need to outline this in your plan so that your CEO feels comfortable authorizing funds to move ahead. Take inventory of your existing skills and technology investments. Determine your core competencies, and then use them as a stepping stone to help determine how you can best leverage what you already have. If you present this information to the CEO, you will be in a much better position to answer questions about why you should move forward with this plan.
The pain analysis is an important part of your strategic plan. You need to determine how much change your organization will need to endure to move ahead with your customer-focused project. What systems will you need to build or interoperate with? Will you need to realign entire departments, such as moving customer support from development to sales and marketing, or vice versa? Does this process of reaching out to customers mean you must abandon some products or product lines in favor of others? Must entire new lines be developed? All these are possible, and you need to anticipate them in your plan. After all, if you are proposing calamitous change for a net increase in revenue by 1 percent, you might need to rethink your goals, or at least put some more limitations on them.
One of the most important things to do in a changing market is to discover how best to meet customer needs. This ensures ongoing business and customer satisfaction and loyalty. New technology trends and solutions make highly customized solutions possible; it is up to each business to listen to customers, determine what solutions meet customer needs the best, and then create a plan to move forward and build those solutions. In the next chapter, you will see examples of several companies that faced increasing pressure to change the way they delivered products to customers, and how they went about analyzing the needs and designing a program to meet those needs.