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E-business: A business necessity?
E-business (electronic business) is not only about buying and
selling, but also servicing customers and collaborating with
business partners on the Internet.
In the late '90s, e-business was seen as the Holy Grail of
commerce -- the next big thing. Promises included increasing the
efficiency of distribution, disintermediation, reducing
marketing and procurement costs, and decreasing errors in data
distribution. Investors pumped billions into companies with no
more than a business plan and a spreadsheet. It was a revolution
and virtually everyone was on board.
Then, between March 11, 2000 and Oct. 9, 2002, the
technology-focused NASDAQ Composite Index lost 78 percent of its
value as it fell from 5046.86 to 1114.11. E-business became the
butt of jokes on "The Tonight Show" and "Saturday Night Live."
Virtually everyone got out of the tech stock sector. Investors
and decision-makers were overenthusiastic during the rise and
overenthusiastic during the fall of the tech sector. The truth
and the value of e-business lies somewhere in between.
There were numerous problems with the implementation of
e-business in the '90s, as there have been problems with
technology implementations all along. (Note the FBI's recent
abandonment of its four-year, $170 million software project to
track terrorists.) Obviously some of the business plans were not
viable (selling dog food online comes to mind), but many others
were. Some ideas required revamping legacy systems in a short
period of time, which was impractical.
Technology has been changing so quickly in the last 20 years
that nontech companies have found themselves challenged to keep
up. When business strategy and technology come together, you
often have mature, experienced business managers who lack an
understanding of technology interacting with younger IT people
who understand the technology, but not the business uses.
Communication between the two can be difficult at best.
Perception vs. reality
According to the eWorld Survey by IDC, one of the premier global
market intelligence and advisory firms in the information
technology industry, there are a number of areas where the
promise of e-business has fallen short of the reality.
The perception has been that the website is the primary focus of
e-business initiatives. In reality, it is also about tying
existing systems to a server that allows information to be
accessible to the Internet. The study says, "There is still a
lot of work to be done. Sales, logistics, supply chain, customer
relationship and database software investments can and must be
leveraged by corporate websites." The gap between what companies
expect of their e-business investments and what their existing
e-business infrastructures are capable of exists in two
dimensions: the capabilities of the websites themselves and
integration with core business systems.
E-business for small business
Although there are many examples of well-executed, relatively
small e-businesses on the Internet, some still believe that the
hurdles are great for small businesses desiring to conduct
integrated e-business ventures. The truth is that declining
service provisioning costs, like server, communications and
hosting have allowed smaller businesses to make big waves in
this arena.
According to the IDC study, "Small enterprises can benefit from
the Web by gains in productivity and by tapping markets not
previously available to them. While many small firms are
particularly challenged by the complexity of inhabiting the
(Internet), they need not make giant leaps to get there. Online
capabilities can gradually evolve from e-mail to simple
websites, then to providing pre- and post-sales online
environments, then leveraging their Web investments to make
internal processes more efficient."
While it is certainly true that the first generation of
e-marketplaces has had trouble gaining critical mass, the IDC
study found that brick-and-mortar companies know about
e-marketplaces and plan to use them.
Regardless of the pitfalls and problems, the Internet has
clearly revolutionized the way we do business. Internet-based
product research and procurement, e-mail, the ability to sell
surplus items on eBay, Internet-based Electronic Data
Interchange and other Internet-based functions have all become
accepted and even critical parts of our everyday business lives.
Despite its slow start, successful e-business projects in the
aftermarket are many and diverse. From the Technology Enhanced
Standards-Based Trading (TEST) program, which uses industry
standards to create an automated trading environment between
Dana and O'Reilly, to ArvinMeritor's exceptional Web-based
trading exchange, aftermarket companies are realizing and
implementing e-business to finally achieve some of the goals
that were promised a decade ago.
Here are a few other examples that come to mind.
Bob Moore, in his opinion piece, "Staid Carquest makes bold
acquisition" (in the December issue of Aftermarket Business),
mentions Worldpac. He states, "They have been a remarkable case
study in taking the traditional aftermarket business model,
standing it on its ear, kicking backsides and taking names."
Worldpac is an Internet-based ordering system that has built a
several hundred million dollar aftermarket business that focuses
on providing high-quality parts for high-end specialized import
repair shops.
The HDeXchange, Inc. (www.hdexchange.com) is a nonprofit
organization dedicated to improving the efficiency of the heavy
truck parts industry through electronic commerce solutions.
Edward Kuo, general manager, states that there are currently 120
major distributors using the exchange, which represents more
than 50 percent of parts purchased by independent distributors
in the market. HDX is currently examining how their model could
be employed to benefit the automotive aftermarket.
One example from the performance and accessories side of the
market is Reliable Automotive, a performance and accessories
aftermarket WD, headquartered in Kansas City. Alise
Miner,
Reliable's IT director, pointed out at the Aftermarket eForum in
Chicago last August that their Internet-based ordering
transactions have increased from 24 percent to more than 80
percent in the past two years.
Realizing the hurdles
Here are a few final hurdles to realizing the advantages of
e-business.
"The Last Mile" is a phrase developed to describe the difficulty
of getting broadband Internet service into homes and businesses.
Delivering technology to the end user in our market represents a
similar challenge. According to "e-Commerce in the Canadian
Aftermarket," a 2003 report funded by AIA Canada, interview and
focus group discussions indicate that lack of participation
among installers could be a barrier to achieving e-commerce
goals within the aftermarket.
Legacy systems are probably the biggest issue affecting the
adoption of e-business technology. Much of the legacy software
and methods of doing business in the aftermarket will need to
change. Current problems include information scattered across
different physical locations on computers running disparate
operating systems.
A third hurdle is difficulty getting cooperation within the
enterprise. Here's a quote from the Dana/O'Reilly TEST Report:
"Central among the findings of the TEST team was that cultural
issues, not technological issues, were the greatest impediments
to effective implementation of standards-based trading. It
seemed that more time had to be spent selling the idea of
adopting standards than on the actual compliance with them."
Tapping into technological potential
Some of the other rewards of all this hard work, most of which
have yet to be realized, are data mining, knowledge discovery
and artificial intelligence.
Data mining is the extraction of hidden predictive information
from large databases.
Knowledge discovery is the process of identifying valid, novel,
potentially useful and ultimately understandable patterns and
models in data. One famous example is the discovery by a
supermarket chain that there is a high likelihood that men who
purchase beer also purchase diapers. Who knew?
Artificial intelligence is the work of programming computers to
make decisions in real-life situations. An example would be a
software program that notes a sharp decline in inventory of a
best-selling product and automatically places a reorder with the
preferred supplier.
Here are some questions that might be answered by data mining
and knowledge discovery tools. Does the average 30-year-old
Caucasian male in the Atlanta suburbs purchase a bug deflector
to enhance the look of his vehicle or to limit bugs on the
windshield? When are the primary bug hatching times in St. Paul,
Minn.? Will extreme winter weather in the Northeast enhance the
sales of batteries and coolant? How will stainless steel exhaust
systems affect exhaust system installers in the north central
states vs. the northeast states vs. the southern states? Should
we be geographically repositioning assets?
A recent Gartner Group Advanced Technology Research Note listed
data mining and artificial intelligence at the top of the five
key technology areas that "will clearly have a major impact
across a wide range of industries within the next three to five
years."
One final concept that can be implemented in stages and begun
immediately is a concept we will call "Data Maximization." Data
maximization is the process of discovering all of the existing
and potential desires of various sets of information recipients
and then planning and building toward the sum of those desires
using data that is currently in our control. Some of this
information will be the normal items stored in a database:
purchase orders, product numbers, specifications and installer
locator data. Other sets of information might not be currently
stored in a database, such as installation diagrams, product
images and material safety data sheets.
Put yourself in the data user's shoes. If you are a replacement
brake manufacturer, a repair shop might need installation
diagrams, service notes, technical service bulletins, recalls,
safety notes, part specifications and a part number
cross-reference. Online training could also be provided, and WDs
may need online ordering and information to assist them in
supporting their jobbers and installers, as well as current
promotions, sales training, and pricing and inventory.
Data maximization is a two-way street. The more value you
provide to the user by meeting their needs, the more information
you will be able to glean from your user base, either through
online ordering habits, tracking their online behavior or user
surveys.
The cost of technology implementation is often more heavily
weighted on the side of training and acceptance than it is on
actual software and hardware. The cost of beginning technology
implementation and then abandoning it can be devastating. This
may require more extensive research and planning than other
business processes and perhaps needs a healthy dose of
skepticism. The bottom line is that e-business is a must in
order to compete in today's environment. Ignore it at your peril.
Dan Jondron is president of Advanced Digital Strategies
(www.digstrat.com) and has over 20 years experience working with
companies in the automotive aftermarket. Her first logged onto
the Net in 1973. Since 1995 he has been teaching eMarketing and
technology topics for SEMA, other trade organizations and
private companies. Dan took his companies public on the NASDAQ
(OTC:BB) in 1999. ADS provides eMarketing and technology-related
consulting services in the automotive aftermarket for companies
large and small. E-mail: Dan at danj@digstrat.com Telephone:
719-845-0021.
About the author:
Dan Jondron, President of Advanced Digital Strategies has over
20 years experience working with companies in the Automotive
Aftermarket, including Fortune 500 companies. Dan first logged
onto the 'Net in 1973 and took a group of companies public on
the NASDAQ (OTC:BB) in 1999. See rest of bio at end of article.
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