Change, Managing

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CHANGE, MANAGING

Traditional brick-and-mortar enterprises are finding it necessary to adopt some sort of e-business strategy as the Internet continues to become a powerful venue for exchanging information as well as for buying and selling products and services. According to Forrester Research, business-to-business e-commerce alone is predicted to generate $1.3 trillion by 2003. Managing the changes that go along with integrating traditional business strategies and e-business plans, however, can often be a multi-faceted and challenging task. Nevertheless, the ultimate goal for many enterprises embarking on an e-business mission is to become a holistic Internet-enabled entity. This entity is one that has fully integrated its e-commerce initiatives into its corporate vision.

Whether simply creating a company Web site or developing a plan to provide products and services via the Internet, an enterprise entering the e-business world is faced with several major issues. Developing an e-business vision and strategy, training employees, adapting to new technology, integrating the new e-business strategy into current operations, and handling new customer relationships, are all important steps in managing change.

MANAGING THE DEVELOPMENT OF AN E-BUSINESS STRATEGY

The shift from a traditional brick-and-mortar enterprise to a click-and-mortar entity typically begins with the formation of the e-business strategy itself, which is often a time consuming and labor intensive process. Many steps are involved in creating an effective business approach, and many levels of management are typically involved. The enterprise must first decide on the common goals it wishes to achieve by implementing an e-business plan. Management should decide why it is going online and what benefits the Internet can provide. It must decide if it is going to target existing customers or try to attract new ones. The enterprise also needs to select target markets and advertising methods, decide what it will be promoting online, identify competitors, and be in tune with conditions in its selected markets.

While these steps are no doubt important, managing the change that goes along with creating a new business strategy is often difficult, and even overlooked. According to a study done by Deloitte and Touche in 2000, 70 percent of online retailers surveyed did not have an e-commerce strategy. Many simply had established a Web site to test demand for their product or service on the Internet. The study did find that those who took the time to develop a strategy were outpacing their competition. According to a January 2000 E-Commerce Times article, "these e-tail leaders have developed a strategy that integrates their Web efforts with other channels. Their e-business effort is designed to win market share and mind share with innovative value-added service—not just to get a presence on the Web."

MANAGING STAFFING ISSUES

In order to successfully manage an e-business strategy, the enterprise must also have an employee base that is open to change. These employees must be adaptable to new technology and able to learn new skills. Major decisions management must make include deciding whether or not to use existing staff, hire new information technology (IT) employees, create new departments, or outsource e-business-related tasks. These employees, as well as the enterprise as a whole, must also learn how to interact with customers, suppliers, and colleagues, by utilizing new communication methods—Web chat or e-mail, for example—that will stem from the new e-business model.

Staffing issues can also be a major snag in implementing an e-business strategy. According the previously mentioned Deloitte and Touche study, nearly 50 percent of retailers surveyed in 2000 did not have a specified leader heading up their e-business initiatives. The study also reported that many executives believed they lacked sufficient staffing levels to support the business that the Internet could generate. Another study done by Andersen Consulting and the Economist Intelligence Unit in July 2000 also found issues concerning employee and enterprise adaptation. According to the report, e-commerce business plans were updated often, which required knowledgeable manpower. The report also predicted that by 2005, over half of e-business initiatives will have a planning life span of less than 12 months. In order to manage quickly evolving e-business development, enterprises need to have employees in place who can work effectively in a fast-paced, changing environment.

The Andersen study also found that financial executives must be will to adapt to new roles and responsibilities as e-business initiatives are set in place—these initiatives often necessitate different accounting methods than traditionally used in the past. Adopting an e-business strategy not only affects accounting executives, but other officers and executive managers as well. Those in key roles must adapt as their positions and job descriptions evolve due to the development of e-business initiatives that affect their area of expertise. Advertising and marketing executives, IT executives, and other key players must manage change effectively in order to keep the strategy in place.

MANAGING INTEGRATION AND NEW CUSTOMER RELATIONSHIPS

An effectively integrated e-business plan has the potential to increase profits, secure a competitive position in a market, and help establish strong relationships with customers. Integrating the e-business plan into existing operations, however, can be a major task. Along with traditional business operations, management is faced with setting financial budgets and allocating resources for e-business initiatives. The enterprise must also manage the increased business generated by entering the world of e-commerce and make sure staffing and systems levels are adequate to ensure quality customer service. Communication across departments is also crucial and management needs to be able to measure success and return on investment (ROI) in its e-business initiatives.

Providing high levels of customer service is also key to successfully integrating an e-business strategy. As the number of shoppers on the Web continues to increase, enterprises need to offer services on their Web sites that parallel a brick-and-mortar experience. Many stores that now have purchasing capabilities on their sites allow shoppers to buy an item online and return in a physical store, if they so choose. Many offer price comparisons. Dell Computer, for example, allows a consumer to build a computer online and track the machine's assembly and shipping status. Amazon.com, recognized as a leader in Web customer service, utilizes software that analyzes customer purchases to make suggestions on music and books in which a consumer might be interested. As Web consumers continue to demand high levels of customer service, enterprises that begin to offer products and services online must have adequate staffing levels in place to manage customer relations and to ensure that these products and services are issued in a timely manner.

Three companies that have successfully managed e-commerce business initiatives are Victoria's Secret, Eddie Bauer, and Cheap Tickets. Victoria's Secret, its online venture operating as a separate business entity, has integrated its catalog, Web site, and retail outlets effectively and has recorded profits from its initiatives. In 1999, the firm used the Internet to promote its fashion show, which was broadcast to over 10 million Web surfers by way of streaming video. By using cutting-edge marketing as well as integrating product data, inventory, and demographics of online shoppers, Victoria's Secret has increased customer transactions on its Web site. Eddie Bauer launched its Web site in 1996, and has also succeeded in recording a profit for its online ventures by integrating customer and inventory information. As a March 2001 E-Commerce Times article stated, "in order for e-tailers to thrive in the new e-commerce environment, companies must integrate their customer and inventory information across all channels and view every customer interaction as an opportunity to learn." Eddie Bauer has been successful with this integration by utilizing software that captures crucial customer information such as size and preference. The software then searches the inventory to come up with purchase suggestions tailored to customer as they shop online. Cheap Tickets, a travel ticket firm, has also managed its e-commerce ventures well. According to the company, its Internet bookings, which grew by 78 percent in 2000, accounted for more gross booking than any of its other distribution methods. Its Internet business was expected to continue to grow faster than any of its other divisions.

While many companies successfully integrate their e-business initiatives, there are enterprises that do falter. Toys 'R' Us Inc., for example, suffered many problems during the 1999 holiday season and was unable to deliver its products in time for Christmas. Many of the toy retailer's online customers were left scrambling to find substitute gifts at the last minute. At the time, the firm was utilizing its traditional distribution channel for its online sales and found itself ill-prepared to handle an unexpected spike online ordering. A class action law suit eventually brought against the firm alleged that Toys 'R' Us deceived its customers by stating it could deliver products on time when it knew this task was impossible. Toysrus.com also came under fire when claims surfaced that it was selling customers' private information to marketing firms.

The company did, however, facilitate a turnaround for the 2000 holiday season. It revamped its distribution methods and partnered with Amazon.com. Under the terms of the ten-year deal, Toys 'R' Us was able to utilize Amazon's experience in e-business by operating its Web site under the Amazon.com platform. Sales increased dramatically. In fact, the company secured holiday revenues of $124 million, a 218 percent increase over the previous year.

Most enterprises realize the importance of not only having a presence on the Web, but also of having an effective business plan that supports its e-business initiatives. Operating a company Web site that enables consumers to find information on products and services, as well as purchase those items, can be beneficial on many levels. A sound e-business strategy has the potential to increase sales, reach markets that traditional brick-and-mortar platforms are unable to access, and reduce operating costs. E-business can also provide an increased level of customer service and a faster exchange of information between the consumer and the enterprise. According to the Gartner Group, "enterprises that have implemented e-commerce as part of a business strategy have been more successful in reducing business cycle times, improving cash flow, reducing inventories, decreasing administrative costs, and opening new markets and distribution channels." While managing the change that goes along with ever-changing e-business initiatives can be difficult, successful management of these initiatives has the potential to pay off in the long run.