Internet to generate new business
Proactively driving inefficiencies out of business should be every executive’s priority
I am often asked by business executives
how they can exploit the Internet as a source of revenue
enhancement because, when they present a case for integrating Internet into their business processes, this is the first question that is asked of them. There is no simple answer to this question because it depends on such factors as type of business/products/customers that a company has, typical order size, degree of customization required, and nature of relationships with customers.
Since most small companies still have not
yet made e-commerce a significant part of their business activities, it is difficult to say what the potential savings can be and how much of their business can be moved online. However, if large corporations are taken as an example, then the savings potential for even small business is tremendous. There are also some learnings to be had from companies in those industries that have taken a more aggressive approach to making the Internet a tool to find new customers, improve customer relationships, and reduce the cost of transactions. Some examples are
Match.com, and others.
Why are small businesses lagging?
I know of many small businesses (and some of them are highly profitable already) have been started during last five years that literally exist only virtually. While some sell physical products that might be stored in a warehouse (or someone's basement), many actually sell only digital products or services. So the key question that executives in small and mid-sized businesses should ask is, "If other companies like ours can take this approach, then what is stopping us from doing it?" My discussions so far lead me to believe that the delay in implementing these initiatives is being caused by lack of knowledge and in-house expertise. For instance, one of the areas with potential for cost reduction is lead generation. Of course, it depends a lot on what business you are in, but as Americans increasingly search
Google even for local information, moving a significant portion of the lead generation activity online is likely to result in lower costs and better results.
The problem is that right now there
is a process in place for doing this at most companies, and there is resistance to
changing it, as there is to any change. The problem gets compounded by the fact that there is no simple IT solution available today for small business (Just a few years ago, small business owners were convinced
by sales folks that having a website was critical, which many of them decided to develop. Now we know that just a website is meaningless if it does not pop up on the first one or two
pages in a search. So the sales pitch now is focused on search engine optimization. This does not work for small businesses that do not have
the wherewithal to stay on the cutting edge). Until the day a solution becomes as simple as an office assistant being able to manage it for the business, small businesses are at a disadvantage.
Why do I think it is wise to make investments into IT for ecommerce purposes? In my opinion, this is because of three considerations: Inefficiencies in business processes can be minimized by use of newly available tools; secondly, information technology can
provide a modest competitive advantage if your
competitors are lagging behind (as argued by Nicholas G. Carr's
in his controversial book Does IT Matter? Information Technology and the Corrosion of Competitive Advantage); and finally, it allows you to keep pace with the changes in business environment.
(Related link: Does
Finally, let me reemphasize why proactively driving inefficiencies out of the business processes should be every executive’s priority. For decades our economic system was built on making profits simply because somebody else could not find information fast
enough or access it altogether, for instance, information on who the suppliers are, what prices are they willing to offer, does someone have excess inventory to unload, and how soon is it possible to get a large enough number of suppliers to compete for a piece of business to receive a lower price? The rate at which information flows today (and this is just the beginning) has made it so much easier to get these tasks done within a matter of hours at practically no cost. Of course, this has also allowed offshore companies to compete with us.
(Related link: Impact of offshoring on American economy)
Our goal of using the Net should not be limited to revenue generation. It should actually encompass higher sales, lower costs, and better relationships (which eventually translate into higher sales and lower costs).
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Questions, comments or