Does your business
need to be on the Web? A group of successful owners and managers
of fruit growing and packing companies didn't think so. They were
doing quite well, thank you, without the Web.
One manager remarked,
"All I'm going to get from this Net and Web thing is a bunch of
people who want to buy a couple of peaches at a time. I'm not
interested in that. I'm not even interested in selling a case
of peaches. I want to sell truckloads of peaches. And I know how
to do that using my sales people and the relationships we've built
up over a couple of generations."
That business owner
was right ... as far as it went. He knew his business well; he
knew it was based on sales, transactions, and service relationships
nurtured over the years. Now he was looking for a way to make
more profit.
But he had forgotten
to apply the basic equation from Business 101. Profit = Revenue
- Expenses. Traditional business basics hold the key to how you
can increase profits by using Net technology. With an equation
like that, two actions make profit go up: increase revenue or
decrease expenses.
That's Net economics:
the possibility of increased sales and, more importantly, the
increased profit on all those sales. That combines with the promise
of cost reductions on administrative services that go directly
to the bottom line.
What if this business
owner had asked, "Could it help my business to save money on orders
by saving money on the order-processing cost? Could it help sales
reps to have certain kinds of information immediately available?
Or could it help to give customers information about special situations
or offers without tying up customer service people on the phone?"
Using the Web to provide
answers to each of these three questions could save money and
increase revenues for you and your business.
While writing our
book Net Income: Cut Costs, Boost Profits and Enhance Operations
Online, my co-author Wally Bock and I researched hundreds of businesses
optimizing their everyday activities with Net/Web technology.
Our research showed them using three Net technology action strategies
businesses to earn more revenue and cut expenses. These three
strategies for business are:
ACTION STRATEGY ONE:
BUILD A PUBLIC WEB SITE FOR MARKETING, SALES, AND ADVERTISING
The Web provides a
way for a business to extend its reach. That's what a small hot
sauce retailer in Pasadena is doing. The store, is appropriately
called Hot, Hot, Hot, uses its Web site at http://www.hothothot.com
to sell hot sauce to customers who live far beyond easy driving
distance. The marketing cost for Hot, Hot, Hot's Web sales is
5% of sales, compared to with 22% for catalog sales. Web sales,
now account for a third of the store's business, are growing at
a rate more than double walk-in and catalog sales. That's direct
bottom-line impact.
The Web can provide
more detailed information about products than would be feasible
in a print catalog and, at the same time, make it possible for
customers to easily order items as they move through the site.
The order-processing
cost for an order placed on the Web is about 70% less than handling
an 800 number order. Taking orders on the Web also frees up order
takers to do other work for your business, and eliminates printing
and postage costs.
ACTION STRATEGY TWO:
BUILD AN INTRANET TO ENHANCE INTERNAL BUSINESS OPERATIONS
An intranet, which
is the private face of the Web, is created by setting up a miniature
Web site inside your company. It's protected from outsiders by
what's called a "firewall." An intranet enhances the efficiency
of your internal business operations.
Basic administrative
information like the employee phone directory can be totally current
without the cost of printing updates. The same is true for product
spec. sheets, production and shipping schedules, benefits information,
company calendars, and a host of other information that needs
frequently updates.
Any company process
(large or small) where forms need to be filled in becomes a natural
fit for an intranet: expense reports, travel advance requests,
simple purchase order processes, and order tracking requests.
Consider also the documentation that needs to be maintained on
quality assurance, emergency procedures, and non-routine administration
functions such as bringing in temporary help. Having those items
available on the intranet makes everyone more productive.
International Data
Corporation, a consulting and research firm based in Framingham,
Massachusetts, has studied the return on investment to companies
who have implemented an intranet. The result: the average ROI
exceeds 1,000% a year, and payback periods range from 6 to 12
weeks.
Productivity gains
have proven to be enormous. The tangible benefits of turning labor-intensive
work over to an automated process quickly and easily brings immediate
and powerful benefits.
OK, who's doing this?
Research by several different companies indicates that by the
end of 1997, better than 90% of the Fortune 1000 are likely to
have an intranet in place. They're doing it for all the reasons
cited above: high return on investment, easy setup, low cost,
quick payback, powerful results to the bottom line. But you don't
have to be a Fortune 1000 company to use this technology.
ACTION STRATEGY THREE:
CONNECT WITH BUSINESS PARTNERS, CUSTOMERS, AND SUPPLIERS BEYOND
THE FIREWALL WITH AN EXTRANET
An extranet is where
the Internet and your intranet come together in an external network.
It can only be accessed by permission with a user ID and a special
password. This lets your company reach out to people who don't
work for you, but who are key players as business partners, strategic
networks, external sales force, and suppliers.
It's also a way to
provide added service to your customers. You can, for example,
give key customers a way to check on their orders already in your
order-processing system and available through the intranet. By
letting your key customers access information, they can check
on orders without you incurring any labor costs.
In his regular Web
site column "The Main Thing," Jim Barksdale, President and CEO
of Netscape on December 3, 1996, laid out the reasons why businesses
are turning to extranets now. He wrote:
"Companies used to
create systems with the idea that they were building them for
inside the business, for whatever use the application had - improving
employee productivity, sharing data while updating Human Resources
information, for example. Then they would build other applications
for use outside the business - either products for their customers,
or products to let the company communicate better with their vendors.
Open Internet Software changes that whole communications paradigm.
Look at the systems
you're building and ask, "What if partners, customers, or prospects
outside the firewall could tap into this?" You might find that
people want to get more information and buy more of your products.
I'm seeing these kinds of discoveries in every industry: from
software to financial services, from transportation to insurance
to pharmaceuticals."
Barksdale sums up
why this technology is so powerful. It works on just about any
platform, it uses software that people are used to, it provides
tools that are easy to learn and to use, and it lets people do
business in ways that are comfortable for them and profitable
for their companies.
All this sharing of
information fits with the major trends in corporate strategy over
the last 15 years. Terms like "outsourcing," "partnering," "strategic
alliances," "demand-driven," "lean," and "agile" have a familiar
ring. As companies become more lean, more agile, and more demand-driven,
they've begun to create strategic alliances, channel partners,
and value chains.
Extranets link these
so businesses can communicate effectively from either side of
a relationship. This is one of the most powerful business ideas
of the century.
The Web, intranets,
and extranets are simple, cost-effective ways of improving your
profits. They let your business take advantage of technologies
that will lead you into the 21st century ... and boost your Net
Income.
