Don't Be Fooled by

the Promise of Easy

E-Commerce
I
CHRIS WOOD t's hard to get through any of today's business publications
without reading about the gold-rush attitudes and actions
driving electronic commerce. If you don't read between the
lines, these articles suggest that silver-bullet solutions—
Interactive Web sites lying just a short step beyond a quick and painless Web
implementation—hold the promise of increased sales, new
are only the beginning. revenue streams, lower operating costs, increased customer satis-
Formulating a potent faction, and the end of despotic political leaders.
It's easy to see what all the fuss is about. In 1997, e-com-
and holistic integration merce transactions totaled more than $1 billion. By the year
2000, experts expect that number to grow to $300 billion. Even
strategy with vital more compelling is the fact that business-to-business (B2B) e-
back-end systems is commerce is five times greater than business-to-consumer (B2C)
e-commerce, which amounted to about $43 million last year.
the key to true long-term According to Forrester Research, B2B e-commerce will grow to
e-commerce viability. $1.3 trillion by 2003—10 times greater than B2C e-commerce—
and will comprise 9 percent of all U.S. business trade. That's
also the year IDC estimates 510 million people will be online
worldwide.
After pondering the above statistics, it's easy to understand
where the near frantic sense of urgency and opportunity that
accompanies any mention of e-comerce comes from. It gets even
more intense when established businesses wake up to discover
their market share being eroded (or "amazoned") by one or more
Internet upstarts. There's not one company with an ounce of
savvy that hasn't paused to consider whether an ebay, Dell, or
Chris Wood is e-commerce program
manager for Forsythe Solutions E*Trade is lurking in their backyard.
Group. Based in Skohie, IL, Forsythe In today's stormy sea of Internet change, many organizations
operates 30 sales offices throughout are beginning to conclude that really exploiting e-commerce
the country. For more information, calls for a good deal more than simply establishing a glamorous
visit the company's Web site at Web presence and electronically connecting to a customer or
www.forsythesolutions.com. consumer.

HANDBOOK OF BUSINESS STRATEGY 33

THE EVOLUTION OF E-COMMERCE

We're starting to see that simply showing up Web application

doesn't guarantee success. According to the Gart-
ner Group, more than 55 percent of all organiza- software has
tions buying into the allure of the Internet
(again—increased sales, greater customer satisfac-
outpaced all
tion, larger market share, reduced costs, etc.) will other e-commerce
miss their mark. Most organizations today have
non-functional Web pages (Generation 1) or, at categories.
most, limited and rudimentary online business
transaction capability (Generation 2). Only now
are some companies taking the time to develop a
comprehensive and visionary plan that will ensure 3 e-commerce. This is the ultimate destination
the success of their corporate core business strat- (see Figure 1).
egy in the long term. Many companies will be best served—at least
A company can realize substantial and sustained initially—by a Generation 1 or Generation 2 e-
benefits of an e-commerce strategy only when Web commerce solution. T h e question that you
sites have fully operational, transactional, and ana- should always keep in mind is not if you will ever
lytical capability. This, in turn, happens only when get to Generation 3 e-commerce, but when. To
there are ties to corporate ERP, supply chain, busi- stay ahead of the competition (or if you are
ness intelligence, customer management, and already in catch-up mode), the sooner you real-
other mainstay legacy systems. This is Generation ize this, the better.

34 HANDBOOK OF BUSINESS STRATEGY

 You should address three critical tasks as soon
as you decide to do anything with the Web. Num-
ber one, make sure you understand why your com- Ask yourself not
pany will sooner or later end up with a Generation
3 e-commerce solution. Number two, start crafting if you will ever get
a roadmap document or diagram that at least takes
a stab at depicting how this evolution (or revolu-
to Generation 3
tion) might occur. Number three, make sure that e-commerce,
the technology tools and designs you use will not
result in any dead-ends en route to your Genera- but when.
tion 3 e-commerce destination.

THE E-COMMERCE ICEBERG With e-commerce—as with any innovative tech-

Typically, companies do not pay enough attention nology—it is also legitimate and advisable to take a
or commit enough resources to e-commerce inte- "reverse" view. Study and understand e-commerce
gration and plumbing. When this is true the technology, and ask yourself the question: "Is there
results will manifest themselves as delays, cost any way we could exploit (fill in tech-
overruns, poor performance, and disappointing nology capability) for strategic or tactical gain?" If
functionality. the answer is no, throw out the idea and move on.
This is what leads to executive management's This approach can reveal benefits that a top-down,
distaste for IT's role in e-commerce projects and business-driven approach could possibly miss. The
the growing wariness of the Internet's potential. goal is to use any means available to squeeze real
What accounts for this back-burner regard for business benefit out of a given technology, such as
integration and plumbing? One explanation is e-commerce. A noteworthy challenge is to find
that driving e-commerce is almost always one or hybrid technology/business people or teams who
more core business (as opposed to technical) can truly exploit and align the areas of potential fit
needs. This is as it should be—except that it can and benefit.
lead to a singular or "silo" approach that lacks Web A p p l i c a t i o n s . Next to the business
comprehensiveness in terms of an integrated cor- needs/drivers category, Web applications usually
porate business vision. get the most exposure and investment. An explo-
Business Needs/Drivers. This is the area that sion of vendors and software are focusing on
usually receives the most up-front attention, one or more e-commerce components: Web
resources, and money. Ultimately any e-commerce servers, storefront/mall, catalog, order entry,
effort has to provide one or more of the following payment (tax, credit card, currency conversion),
five benefits: cost reductions, increased customer customer service, search engines, personaliza-
retention, reduced cycle times, access to new mar- tion, traffic management, Internet imaging, and
kets/customers, and branding. These are the dri- a universe of development tools. Web applica-
vers that should initiate any and all e-commerce tion software has in fact outpaced all other e-
projects. They are also the beacons that you commerce categories.
should use to keep projects on track. This explains why Web application software has
In addition to e-commerce, ERP, supply chain, turned out to be the single most dangerous layer of
and business intelligence/data warehouse the e-commerce iceberg. You must heed a great
providers parrot these goals in ways that can sound deal of caution. We're now in an era populated by
very similar. How can they all purport to do the hundreds of cheap, powerful, easy-to-install, easy-
same thing? The answer is that none of them can, to-run Web component software products. Estab-
to the maximum extent possible, without the oth- lishing a first generation Web site takes anywhere
ers. This is yet another way of stressing the impor- from one hour to a few days. Vendors are under-
tance of splicing them all together, also known as standably targeting non- or relatively non-technical
back-end integration (discussed later). users for their products. Companies are so enticed

HANDBOOK OF BUSINESS STRATEGY 35

by the allure of these tools that they're diving into
e-commerce without thoughtfully considering the
business needs/drivers, IT infrastructure, and Exploit existing
back-end integration layers.
standards and
BELOW THE WATERLINE
augment them
As depicted in Figure 2, e-commerce's inexorable
march toward ever increasing numbers of users with customized
and functional (as opposed to visual) sophistica-
tion mandates complex links to external systems.
software.
This will, in turn, place escalating demands on the
underlying technical infrastructure.
IT Infrastructure. Categories that we used to Procedures, and Components) as links in a chain.
think of as esoteric or optional have now become Like a chain, each link is every bit as important as
critical. These categories include high availability, the rest. Use this diagram to check the sanity of
capacity planning, security, monitoring, service lev- your e-commerce IT landscape. Delve into each
els, backup/restore, disaster recovery, etc. We can bulleted item, understand it, and decide what, if
refer to these collectively as "e-commerce techni- anything, needs attention regarding it. The goal is
cal plumbing," or simply "plumbing." Figure 3 to make sure your e-commerce solution meets
shows the composition of e-commerce plumbing defined performance, functionality, and reliability
and where it fits in the scheme of things. goals. Cost-effectiveness is also a goal that you can
In general, think of each of the four boxes best realize if you plan in an up-front, as opposed
(Business Drivers, Web Applications, Practice & to an after-the-fact or reactive, manner.

36 HANDBOOK OF BUSINESS STRATEGY

 Back-End Integration. This is the one category dards and standards components are less expen-
where companies can make the most hay. It is, in sive, but often do not do everything you need. The
terms of technology prowess, also the most chal- rule of thumb is to exploit standards where they
lenging. The Holy Grail of any e-commerce project exist (to add to the fun, we're starting to see multi-
is to achieve benefits that the company can realize ple competing standards) and augment them with
only by linking its e-commerce site (or sites) to customized software.
external, or back-end, systems. This is also known Using the aforementioned "reverse" view
as Generation 3 e-commerce. It is critical to note approach, you might want to look at all business
that these systems can be internal and external systems that exist in your company's domain and
(see Figure 4). that of your partners and for each and every one of
Keeping to the goal of business driving technol- them ask the question: "Can we derive any busi-
ogy; you want to forge those links that a tangible ness benefit by linking these together?" Some
business benefit ultimately dictates. This is very examples:
much easier said than done. The business process • Could there be any benefit in linking e-com-
modeling requirements can be as daunting as the merce and SAP systems?
technology integration work. • If so, what about linking these two somehow
Technology architecture and software issues and—if it makes business sense-adding a link
(available APIs, toolkits, language support, multi- to suppliers' PeopleSoft systems?
ple competing standards, etc.) are some of the key • If many of your distributors use i2 Technolo-
IT hurdles. The yin-yang of back-end integration gies products for logistics, how would some
are the words custom-built and standard—as in kind of i2 linkage enhance your e-commerce
"custom-built interfaces" and "interfaces built on capabilities?
standards." Custom-built interfaces are usually Building external systems-to-external systems
very expensive to build and maintain, but provide links may be a desired or required task. This would
exactly what you need. Interfaces built using stan- be in addition to one or more e-commerce-to-

HANDBOOK OF BUSINESS STRATEGY 37

 tion of substantial business goals will amply justify
any pain and suffering this exercise causes.
Experts expect the worldwide market for enter-
prise systems to climb to an estimated $55 billion
by the year 2000. More than half of these systems
are currently failing to meet their potential. The
successful organizations will distinguish themselves
by offering customers and partners a fully integrat-
ed suite of e-commerce offerings that are effective-
ly tied to internal and external back-end systems—
from order all the way through fulfillment. Don't be
e-fooled—you can realize goals such as mass cus-
tomization, one-to-one customer intimacy, self-ser-
vice, and Generation 3 e-commerce only when you
have tied everything together.
You need finesse to decide when, where, and
how to pounce on a given e-commerce opportunity.
Leveraging the talents and resources of an emerg-
ing class of e-commerce-focused consultants is a
viable, and probably even prudent, path to take.
Understand that your company will ultimately
external systems links. Now it is easy to see the arrive at Generation 3 e-commerce. Start pointing
exponential growth of complexity. Despite, or your, or someone else's, consciousness in this
maybe because of this, you need to make an early direction. Remember the e-commerce iceberg and
and serious roadmap for the project. The realiza- that all the layers are equally important. #

38 HANDBOOK OF BUSINESS STRATEGY