e-Business Value Proposition Analysis- Valutrics
How can an organization utilizes e-business for a competitive advantage in the marketplace? There are various components to e-business, including the business strategy, the organization or people, and the processes, as well as the technology. All of these components are necessary for e-business success.
The level of detail for the e-business strategy planning process is critical. It is necessary to outline and analyze the strategy in sufficient detail, as the issues, difficulties, and problems are often found in the detail. Planning translates the organizational goals into strategies, day-to-day projects and tasks that can be implemented. This is true for business planning as well as e-business planning. It is far better to spend the time to fully develop the strategy rather than invest a lot of money and stumble in the marketplace.
Value Proposition:
In the past, value propositions were frequently inward looking, paying attention on the product or processes. With the consumer as the heart in the new economy, value propositions should have an outward emphasis. A value proposition is what the business is attempting to accomplish for the customer.
Or, from the customer vantage point, the value the customer needs from the business. The value proposition must be regularly assessed because competition is trying to make the value outdated.
Some questions to inquire when developing the value proposition comprise:
• What does the customer value? Does the customer value crossselling, up-selling, new or updated products and services, supply chain efficiencies, decreased cycle times, or faster time-to-market? Which of these are important to customers?
• What does the customer not value and is unwilling to pay for?
• What does the customer not value today but will in the future?
• What value would delight customers and exceed their expectations?
• How will e-business change the customer expectations?
• How can a new value proposition be created for the customer?
• What new forms of value can be created?
• How can the business build loyalty and maintain customers in the connected economy? How can the customer be encouraged to do business with the business and not with competitors?
• What do customers have in common? How could they gain value from one another in a community?
Value Delivery Proposition:
The value delivery proposition is how the product or service will get the business closer to the objective, or the stated values. Some questions to inquire when developing the value delivery proposition include:
• How is the business positioned to deliver the value?
• How is the competition positioned to deliver the value?
• Can other entities provide the same value?
• How can the business model change to better deliver the value?
• Can the business expand value by moving up or down the distribution channel?
• Can the business transform from a commodity offering to a total experience offering?
• Can the business change the delivery of the value?
• What challenges or barriers will the company face?
• How can the business be designed to meet customer expectations?
• How can the customer experience be improved?
• Can the business create a totally new experience for the customer?
• How can the business make the product/service faster?
• How can the business make the product/service more convenient?
• How can the business make the product/service more personalized or custom? How can the business deliver personalized service?
• How can the business offer the product/service at a lower price?
• How can the business offer the product/service at higher quality?
• How can the business own the customer’s total experience? How much control does the business have over the total customer experience (including learning about productions, selecting, quoting, purchasing, delivery, setup, installation, after-care, service, purchasing follow-on products, taking delivery, invoicing, resolving disputes. )
• Does the business provide a 360-degree view of the customer relationship (i. e., whoever takes the call has access to records of the customer relationship even if it is with another department)? Can the customer access information about all his or her accounts or issues?
• Can customers help themselves?
• How can the business utilize technology to do things it is not currently doing?
• How can the business increase flexibility and responsiveness?
• How can the business be more efficient and effective?
• How can the customer process be streamlined?
• How can the business take advantage of the strengths and minimize the weaknesses? How can the business aggressively take advantage of the opportunities and diminish the threats?
• How can the business impact the competitors and industry?
• How can the business re-engineer the value chain?
e-Business Strategy:
The strategy preference of operational excellence, customer intimacy, or technical superiority will drive completely distinct e-business initiatives and strategies. For instance, a business that is striving for operational efficiency will utilize e-business for areas such as e-procurement, supply chain integration, customer self-service, employee communications, and online recruiting. A business that is striving for customer intimacy will employ e-business for customer support, customer surveys and input, personalized marketing, portals, building communities, and automating the contact center. A business striving for technical superiority will employ e-business for engineering, interfacing with CAD, communicating with suppliers, and cutting down the time-to-market.
The following questions will aid develop the strategy:
• How will the business create value in the future? Is it to reach more and new types of customers, offering cross-selling and upselling? Is it through new or updated products or services, new packaging and pricing approaches? Is it through supply, service, or distribution chain efficiencies? Is it through decreased cycle times, faster time-to-market?
• How can the business use e-business to meet customer needs as well as the business goals and objectives?
• Is the business a market leader or follower? Where does the business want to be?
• Will the business consider an aggressive e-business approach to e-enabling the entire enterprise and processes, or will it utilize e-business in a targeted approach to provide information, enhance service, facilitate transactions, or provide community?
• What are the driving objectives the business may utilize e-business to accomplish? For example, is the business going to use e-business to reduce costs, generate leads, increase revenue, improve communication, develop brand, enable new business models, launch a new product, or train employees?
• What new opportunities does the Internet provide?
• What additional markets can the company reach?
• What does the business do well to satisfy customers and how can it be ported and exploited in the electronic playing field of the Internet?
• What role can the Internet play in helping the company meet the value proposition and value delivery proposition? What role can the Intranet play? What role can the Extranet play?
• Is the business strategy to meet customer values by achieving operational excellence, customer intimacy, or technical superiority?
• With what partners and suppliers will the business need to align?
• How can the business build trust and share among partners?
• What is the true core identity of the business? Disassemble or outsource those activities not core, assemble those that are core. What can be separated or outsourced?
• What is the business doing that it shouldn’t be doing?
• Has e-business changed what the company does, what groups of customers are served, what products or services are provided, or what sets the business apart from competition?
• Has e-business changed where the company is going or what it is going to become?
• Has e-business and designing the strategy from the outside in changed how the company wants to articulate the values?
• Do the goals need to change in light of thinking from the outside in?
• Do the objectives change as a result of e-business? Are the stated levels of ambition, goals, and objectives high enough or do they need to be reset? Can the objectives be accomplished more quickly with e-business initiatives?
Make sure the business focus and priorities are crystal clear. Efficiency, costs, profits, and customer satisfaction cannot be of equal importance to the organization. The organization cannot have it all in the new value- driven economy. For example, if the organization’s true priority is customer satisfaction, the organization may have to link with competitors and partners even at the expense of profits and trade secrets
Value Metrics
How does the business evaluate progress alongside that strategy? To answer that question, define how the business will measure value in the future. Many companies measure progress only with internal financial metrics such as sales, profits, return on investment, or costs. Companies that manage based upon a balanced scorecard have customer and people metrics as part of their measures in addition to financial metrics. The balanced scorecard is a more accurate representation as it recognizes that no single measure can provide a clear picture of how an organization is functioning. Although it is important to have financial, internal, and people metrics, a customer-driven organization that has developed the strategy from the outside in should emphasize customer metrics.
Identifying specific metrics to evaluate the success of e-business initiatives can be a challenge. One company identified the business impact that e-business would have on the organization, as follows:
• Reduced calls to customer support as customers would obtain information from the Internet
• Customer satisfaction should increase as customers are able to obtain information and have individual preferences and needs addressed
• Customer retention would increase through improved customer service
• Business processes should be faster and less expensive as information and processes are facilitated by the Internet
• Supplier costs would decrease as a result of streamlining the business process and improved relationships
• New customers would be attracted through faster time-to-market and value-added services
• Sales would increase through self-service order processing, up-selling, and cross-selling
• Overall business and profit should grow as well as market reach and recognition
Some companies distinguish specific business metrics that would be influenced by e-business, such as:
• Customer satisfaction will increase
• Number of repeat customers will increase
• Customer responsiveness will increase
• Customer retention will increase
• Customer complaints will decrease
• Number of returns will decrease
• Number of customer support calls will decrease
• Average cost per call (revenue/calls) will decrease
• Cost per order (sales/order) will decrease
• Cash-to-cash cycle time will decrease (includes days of inventory, days of receivable, days payable, production cycle time, and days sales outstanding)
• Number of customers will increase
• Sales will increase
• Number of partners will increase
• Supplier responsiveness will increase
• Total costs will decrease
• Productivity will increase
• Profits will increase
• Cost of marketing (marketing/revenue) will decrease
• Market share will increase
• Quality of order fulfillment will increase
• Documentation accuracy will increase
The challenge with measuring e-business achievements with either the business effect or business metric method is that there may be no way to isolate a direct correlation between the result and the e-business initiative.
If the Internet is used to generate sales, Internet sales can be measured. Nonetheless, a company may utilize the Internet for more indirect benefits such as promotion, customer service, or increasing customer satisfaction.
For instance, if sales increased, perhaps it was not due to the new e-business functionality, but rather new product design, an aggressive marketing campaign, or many other business initiatives that are occurring at the same time.
Other companies measure e-business by technical metrics, such as:
• Number of hits to the Internet, number of page views, site traffic
• Areas of the site most visited, paths visitors took within the site, clickthrough rates (number of successive screens a visitor goes through)
• Duration, number of minutes per average user on the site
• Number of Internet transactions processed, number of inquiries satisfied by Internet hits, number of self-service interactions
• Abandonment rates, abandonment rates with items in shopping cart
• Percent of visitors who return within a year, time between visits, customer loyalty, customer retention rate (by purchases)
• Percent of visitors who are buyers, reach (percentage of visitors who are potential buyers), number of new visitors to the Internet site, visitors by country
• Interest percent (any action expressing interest, registering, asking for information)
• Number of proactive touches with a customer
• Mean time between failures, availability time, mean time to repair, server and site up-time, load balancing statistics, page and form errors
• End-to-end response time average, throughput time, page load time
• Number of security issues, resistance to assault or intrusions
• Length of time since last update of site information
• Dollars spent on e-business
The difficulty in utilizing the technical metrics is that there is no tie from the usage to the business value that was generated as a result of the usage. For example, just because the organization had 10M visitors to the site, did that help profits increase?
There are two possible options to address the cause-and-effect dilemma when measuring e-business success:
• Utilize a balanced scorecard approach with the business metrics as well as the technical metrics. The true picture is a combination of the two types of metrics. This balanced approach shows that there are various indicators that need to be considered in total to determine the progress. Be sure not to utilize too many metrics, but rather just a few of the ones key to the business strategy.
• The measurement of e-business success could be simplified to one metric, that of customer satisfaction. An organization that is driven by the customer and has developed the strategy from the outside in has only one true measure of success, that of customer satisfaction.
For instance, an Internet site providing information could have an infrequent pop-up window that asks the customer to rate his/her satisfaction with the Internet page in providing the information needed. The customer could be rewarded with a discount for replying to the survey.
Market and technology changes are rapidly changing the dynamics of competition. To be competitive, organizations must be both effective and efficient. Companies can establish a competitive advantage with e-business by optimizing the value chain and improving the effectiveness of the demand chain.
Using the Internet, companies can immediately expand their marketplaces and become global. Using e-business, companies can increase their market shares and take business away from the competition. However, a business can also just as easily lose market share to competition, as competition is just a click away.